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IT Contractors professional indemnity insurance

Information technology is a fast moving and ever changing industry. As an IT contractor it is likely that the work your carry out will fall in to one of the following categories:

  • Packaged Hardware / Software Provision
  • Development of Bespoke Solutions
  • Consultancy / Project Management
  • Outsourcing
  • IT Recruitment
  • Internet Services

The following is a list of trades that would be suitable for cover under a technology and media Professional Indemnity policy wording. The list is not exhaustive but this will cover most areas of expertise in the field :

When professional indemnity underwriters look at an IT risk there are a number of factors that they will take in to consideration before providing a quotation:

Size of the firm – This is mainly established in two ways, the number of directors and staff and the gross annual income of the firm.

Qualifications and experience – Underwriters will look for a mix of qualifications and experience and a CV of the directors or principals will often help underwriters when they assess the risk.

Potential for loss – Underwriters will want to try and understand what would be the immediate financial loss, and other consequences, if data is incorrect, a system fails or becomes unavailable for any period of time. Experience has shown that the majority of the litigation against IT Companies occurs because of;

  • Failure of the software / system to do the job which it was intended for.
  • Failure to deliver the system on time.
  • Failure to deliver the system to budget

As a result of this a client may either :

  • Withhold some of the fees due or claims the return of the purchase price.
  • Claim for a direct financial loss arising from negligence of the IT Company and perhaps even for consequential losses also.


Written contracts – Underwriters will be keen to see a copy of the I T Contractor’s standard terms and conditions as these would be the first line of defence in the event of a claim against the IT Contractor when assessing the extent of their contractual liabilities. Insurers would expect the terms and conditions to include a consequential loss exclusion.

Claims experience – The claims experience is an important determining factor in the assessment of risk. This information usually reflects the type of work carried out by a firm. It also reflects the quality of the firm’s work, staff, internal risk management and experience.

Type of client – A prime underwriting criteria is what kind of work that the IT professional is involved in. Areas of particular concern to insurers include:

  • The financial sector
  • Games development
  • Trading systems
  • Process control systems
  • ASPs (Application Services Provider) or ISPs (Internet Services Providers)
  • Managed Service Providers
  • Mission and safety critical systems

Retroactive exposure – Does the firm have an exposure to claims arising from past work, whether in the current firm or a former practice?

A typical professional indemnity policy wording for an IT Consultant would cover the following:

  • Breach of civil liability
  • Negligent act error or omission
  • Unintentional intellectual property rights infringement (other than patents)
  • Unintentional breach of confidentiality
  • Unintentional defamation
  • Loss of third party documents or data
  • Computer virus transmission
  • Negligence of sub-contractors
  • Irrecoverable fees
  • Rectification and loss mitigation costs
  • Bodily injury or property damage arising from breach of professional duty
  • Defence costs
  • Court attendance costs

Hensure Business Insurance can cater for all types of IT risks and approach a number of different insurers to obtain the best cover and premiums available in the market. Please try us today.

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