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IT Contractors professional indemnity insurance

IT Contractors professional indemnity insurance

The need for IT Contractors professional indemnity insurance is becoming more and more important as time goes on. 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, all of which are open to risk:

  • 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 IT Contractors professional indemnity insurance premiums available in the market. Please try us today.


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