Two thirds of smaller firms have failed to cover themselves with Professional Indemnity insurance, new figures have suggested.

Despite the number of SMEs taking out PII growing by 235,000 – or 14 per cent – last year, without sole traders, there was a significant fall in the number of micro (-15 per cent) and small (minus six per cent) businesses taking out PII policies, according to the new research from Direct Line for Business.
The company warned that this was a dangerous prospect because businesses risk financial ruin without the appropriate PII cover.
The analysis suggested that only 733,000 SMEs (14 per cent) were considering taking out PII in the next 12 months.

Financial services firms were the second most likely sector to have PII cover (59 per cent).
Gary Holmes, Products Manager at Direct Line for Business, said: “The number of sole traders with PII has risen sharply over the past year, underlining the importance these entrepreneurs are placing on protecting themselves from the potential knock-on effect of a client suffering financial losses. That said, there are still a large number of businesses who are offering services or advice that don’t have the right cover in place, thus exposing their businesses to huge risks that could cripple their enterprises.
“Without the right cover, providing incorrect advice or losing data could end in financial ruin for an SME.”
When broken down by industry, Direct Line for Business’ analysis revealed that SMEs in the legal services industry were most likely to have PII, with 88 per cent of businesses taking out insurance. This was followed by financial services (59 per cent) and scientific, technical and engineering research
(52 per cent). SMEs in transportation (12 per cent) and retail and wholesale (11 per cent) were the least likely to have PII cover.
Jamie Newell from O3 Insurance Solutions, a specialist PI broker, gave an update on PI at the IFP Annual Conference this week. He said defined benefit transfers were the new “hot potato”. There are only 4 or 5 options for Financial Planners and wealth managers in terms of insurers that they can go to for PI, he said.
Cyber cover has become a new feature to protect against hacking, he explained.