At a glance
- Broad management risk solutions should include D&O cover in order to protect SMEs from the many liabilities that arise from managing a business
- Directors' & Officers' (D&O) cover protects the individual whereas other cover only protects the company
- Cover can be bought for as little as £100
Directors’ and officers’ (D&O) cover is an important but often overlooked part of a broader set of business risk covers designed to protect managers from the many liabilities that arise from managing a business. In many cases, customers are simply unaware of its existence and of the need to have it, as detailed in a recent report.
Individuals that manage an organisation have certain obligations to employees, shareholders and colleagues. D&O cover protects them against claims that may come against them for falling short of those obligations.
We look at four frequently asked questions about D&O, which should help to explain the benefits to customers.
What’s the difference between D&O and other types of business cover?
Broadly speaking, D&O cover protects the individual while other kinds of cover, such as those found in Zurich’s Executive Risk Solutions policy, protect their company as well.
This is an especially important cover to include in the case of owner-managed businesses because personal and corporate are usually so closely linked. Just covering your corporate risk can leave your personal wealth, and even liberty, at risk from claims against you as a company director or officer.
Why do customers need cover even if their business is a small one?
Executive Risk Solutions, including D&O, covers individuals that manage an organisation against claims that could include wrongful dismissal, claims arising from insolvency, harassment, bullying in the workplace and protection against dishonest staff.
The policy also helps to protect against the loss of personal assets; in some cases individuals can be held liable for corporate taxes or for environmental mismanagement claims. It can also provide defence costs against actions that could put them in jail; directors risk jail time for health and safety legislation breaches or corporate manslaughter, for example.
What do I say if they claim they are not likely to be at risk and don’t need cover?
A claim is more likely than they think. It is generally accepted that society, and the workplace in particular, is becoming more litigious. Directors are five times more likely to be dragged into an employment tribunal than to suffer a fire on their premises.
Directors and officers of smaller businesses in particular can benefit from cover since they are more at risk than larger businesses of failing to comply with complex new HR laws.
What if they think D&O is expensive?
Cover can be bought for as little as £100 for companies with turnover under £150,000, for example. Comprehensive cover, including employment practices and crime cover, can cost under £550.
Another reason why it makes sense to take out D&O cover is that the company will pay for the cover. Why wouldn’t they take out the cover if it costs them next to nothing and protects them from a broad range of risks?
For more information on Zurich’s D&O offerings, contact our underwriters.