Professional indemnity insurance for consultants is not a luxury

With changing trends in the economy and labor market, more and more professionals are venturing into the consulting industry, to grow their careers, earn more income, become financially independent or even just to achieve a passion or hobby.

A consultant is anyone who provides specialized services to a client ranging from providing information, solving problems, proposing actions or selling products.

However, consulting or any business that involves providing professional advice involves unique risks. The negligence of a consultant or professional advisor, for example, could result in serious financial or business loss for a client.

To put this into perspective, an engineer supervising the construction of a building that collapses killing or injuring people may expose themselves to a malpractice suit. A doctor who misdiagnoses a disease resulting in the death of a patient can be sued for negligence. Errors made by an accountant could mean the loss of millions of shillings for a business.

Most consultant-client relationships are governed by a contract. The latter comes with implicit conditions, one of which is that the advisor must exercise due diligence in the provision of the services. However, even the most seasoned professionals make mistakes resulting in financial and legal liability claims by clients and third parties.

With more people aware of their legal rights, coupled with an increase in the amount of legal compensation for injury or business loss, professionals like doctors, architects, accountants, engineers, lawyers, IT experts and consultants financial officers, to name a few, are now more exposed to serious financial liabilities in the course of their work.

This is where insurance comes in to deal with the risks associated with malpractice or negligence. Specifically, Professional Liability Insurance (PLI), also known as Professional Liability Insurance (PIL), is an insurance policy protecting against risk and financial liability arising from professional misconduct or negligence.

PLI covers against unforeseen situations that could result in financial loss for anyone providing specialist services. Since many professional consultancy firms in Kenya are small businesses (SMEs), the likelihood of insolvency in the event that a court awards damages amounting to millions of shillings to a client is quite high. PIL policies cover a range of risks, including court decisions, legal fees and expenses.

At AAR Insurance Kenya, we have seen a trend that more and more professionals in private practice are keen to take out professional insurance covers. We often advise our clients to consider the unique risks underlying their business to provide the appropriate risk coverage.

Some of the benefits of PIL policies include offering last expense coverage and continued coverage in retirement.

With digital insurance, taking out professional liability insurance has never been easier. You can get PLI coverage in less than five minutes online from the comfort of your office and home. Even if you work from home or operate a side business, you still need the peace of mind that comes with indemnification coverage against customer claims.

Additionally, in an increasingly litigious society with heightened media scrutiny, professionals need to protect their reputation, which is often one of their most valuable assets. The underwriter works closely with the client to address customer and third party complaints, thereby limiting unnecessary negative publicity.

A PLI policy also improves the profile of your consultancy as some clients, particularly corporations and multinationals, require their consultants to be insured against professional negligence. Therefore, one should not consider such insurance coverage as an expense but as a financial tool to develop one’s consulting business.

Mrs. Ndegwa is Director of Operations, AAR Insurance Kenya