At a glance
- With research suggesting that just 30% of SMEs have D&O cover, there is a growing need for this type of insurance with regulators now turning their gaze on to company individuals
- Zurich is refreshing its D&O offering to reflect current trends and has one of the most comprehensive propositions in the market
- Zurich’s new ZTrade platform can now provide a ZIP (Zurich indicative price) for D&O in 60 seconds
Too many company directors and officers in SMEs are unaware of their liabilities and so fail to properly protect either themselves or their firms. To combat this, directors’ and officers’ liability insurance (D&O) should be central to the discussions that brokers are having with these customers.
The liabilities borne by directors and officers in the SME sector have gone unacknowledged for too long and as these individuals come under increasing scrutiny, the risk of facing a claim has grown significantly.
Indeed, there is a growing regulatory trend in the UK to pinpoint individual errors and to prevent people from hiding behind faceless corporations when things go wrong.
Examples of D&O claims that Zurich has settled
An allegation of slander was made by a customer against an officer of a company. Allegedly comments were made by the manager in public, which supposedly damaged the reputation of the customer. A threat to take the manager to court was made unless a settlement was forthcoming, which was negotiated at £26,500 and covered under the D&O policy.
An employee was dismissed for gross misconduct after a violent altercation at work. The company’s disciplinary committee judged he had brought the company into disrepute and their decision was in line with the rules and procedures set out in the company handbook. The employee brought an unsuccessful claim for unfair dismissal and legal costs of £7,900 were paid under the D&O policy.
Prior to making an investment in a company, an investor was given details of the company’s solvency and profit. Following the investment, it became clear that the solvency level and profit levels had been misrepresented. The directors had negligently overstated the company’s financial position to encourage investment. The D&O policy paid out £10,000.
Even if the individual in question has not acted improperly, the cost of investigating and then defending an allegation, which could prove to be unfounded, can easily run to tens of thousands of pounds. It also eats up a lot of management time and effort and distracts SMEs from their core focus.
One popular misconception, for example, is that directors working for a limited liability company have no personal exposure. This is not the case and where a director or officer of a company fails to discharge their mandatory responsibilities they can be held personally liable for their failings.
Another misconception is that D&O cover is unaffordable but with modern systems taking out insurer and broker expense and new propositions designed for SMEs, core D&O cover starts from £100 for the smallest companies.
D&O cover will ensure that not only are claim and legal costs met but also that an insurer like Zurich can provide its expertise to guide customers through the process and prepare the best possible defence in what can be a difficult and stressful time.
Vast range of potential D&O claims
The source of potential claims is very broad and it continues to grow. Claims from employees and regulators are particularly prevalent at the moment and may involve anything from unfair dismissal, harassment or discrimination to health and safety misdemeanours.
Zurich offers one of the most comprehensive D&O propositions in the market and reviews it regularly to ensure it remains at the forefront of what is available.
The proposition is constantly being refreshed, currently employment claims are subject to an excess however this excess will be waived for the first claim under this section under the new wording.
SME D&O cover is also available on the newly launched ZTrade platform, making life faster and more convenient for brokers when buying the cover.
Research by Datamonitor suggests that 70% of SMEs do not have D&O cover despite the increased regulatory scrutiny and the more litigious nature of our modern world.
With a growing need for this type of insurance and insurers like Zurich providing excellent cover, competitive pricing and instant online trading capabilities, D&O for SMEs is an untapped opportunity for brokers to add value and grow.