The vital importance of Directors’ and Officers’ Insurance
What is the cover for?
Directors’ & Officers’ Insurance (also known as ‘D & O’) is designed to protect the key individuals within your organisation.
Claims can be brought against the directors & officers within a company for alleged wrongful acts, which can include errors, neglect and breaches of duty occurring while they fulfil the specific responsibilities that relate to their role.
What are the risks & what protection will the cover provide?
Proceedings can be brought under a number of pieces of legislation including the Companies Act – which set out the duties and responsibilities of a director – Insolvency Act, UK Bribery Act and Employment Law.
Against a backdrop of increasing litigation, staying on top of these duties and responsibilities is a significant challenge for directors and key managers, making the protection offered by D & O insurance essential.
If directors and officers do not have this protection in place, they face a greater risk of not being able to defend themselves against:
- Disqualification & significant reputational damage
- Civil proceedings which can lead to substantial legal costs
- Criminal prosecution, fines and possible imprisonment
D & O also covers against investigations and fines imposed by regulators and bodies such as the Health & Safety Executive. If a fine is levied against a director, it is a personal liability and cannot be charged back to the company.
D & O can also provide access to specialists & legal advice which can significantly reduce the disruption to management time from an investigation or legal action.
The current market situation
While D & O cover is taken out by most of the largest companies in the UK – in fact, it is rare for a director to accept a position at one of these firms without this protection being in place – it is a policy that relatively few SMEs are aware of.
According to Datamonitor’s SME Insurance Survey in August 2014, only 23.3% of respondents had D & O cover in place; for the micro-SME sector this falls to 10.6%. SMEs face many of the same risks as larger organisations, but without the in-house legal and PR teams to assist with an action against them.
How can BQI help?
At BQI, we have access to a range of insurers and can tailor a D & O offering to suit your business’s requirements.
D & O cover is more affordable than ever with policies starting from only a few hundred pounds.