Directors & Officers Insurance: Are you covered?
If you are a director or a senior officer within a business, and you haven’t already got it, then you need to consider taking out Directors’ And Officers’ (D&O) insurance. Currently Directors’ and Officers’ insurance is predominantly confined to larger organisations, with coverage within small and medium sized enterprises (SMEs) being worryingly low. Insurance Age recently reported that while the majority of FTSE 250 directors now have Directors’ & Officers’ insurance cover, Datamonitor’s 2014 SME Insurance Survey found that just 23% of respondents had D&O insurance cover in place.
Directors’ & Officers’ Insurance: Can you afford to be without it?
There is no doubt that Directors’ & Officers’ insurance is becoming more common with the number of policies being written having risen sharply in the last twenty years. The reasons for this include the rise of litigation and regulation, both of which have become more prevalent and more expensive. Such are the risks associated with these issues that the directors of many large firms are not merely opting for D&O insurance but are making it a precondition of accepting a directorship in the first place.
This realisation of just how important D&O cover can be hasn’t filtered down to many smaller businesses as yet though. Directors of medium sized enterprises are becoming more aware of the range of risks they face, and not just from their own shareholders, so they too are taking out D&O policies to protect themselves. Unfortunately, directors of small businesses are still firmly in the minority when it comes to having D&O cover, with Datamonitor stating that less than 11% of small business directors have D&O insurance.
Directors’ & Officers’ Insurance: Insuring risks ALL businesses face
When it comes to D&O, size doesn’t matter. All businesses, from the multinational to the sole trader face the same regulator’s evaluation of their activities, irrespective of their size. Equally if the employees of a small company feel their rights are being abused, they will enjoy the same right to seek recompense as those of a FTSE 100 listed company. Indeed, medium, and especially small businesses, are arguably at even greater risk than their large scale counterparts in this area as they are unlikely to have the human resource and legal infrastructures in place to avoid issues or to deal with them in-house. The subsequent disruption to the business can be costly, something else that larger organisations can more easily deal with.
Directors’ & Officers’ Insurance: A single policy covering a range of risks
Many in the insurance industry feel the reason that so many small business directors don’t have D&O cover in place is that they simply don’t appreciate the risks they run in not having it. Allianz Insurance lists the following potential threats that SMEs need to protect themselves from:
- Social Security
- Bankruptcy Trustees
- Other Directors who have D&O insurance
Such a list really does go to show that D&O is not only for large organisations, as all businesses, no matter how small, will have at least some of the above risks that they may need protection from. Directors’ and Officers’ insurance from Coversure will cover you against:
- Employment practices & HR issues*
- Shareholder actions*
- Reporting errors*
- Inaccurate or inadequate disclosure (e.g. in company accounts)*
- Misrepresentation in a prospectus*
- Decisions exceeding the authority granted to a company officer*
- Failure to comply with regulations or laws*
*Terms and conditions apply
Directors’ & Officers’ Insurance: A Small Price for Great Peace of Mind
Directors’ and Officers’ insurance is generally affordable and provides a wealth of cover that can help protect, not just directors and officers, but also the business itself. If you would like some more information on Directors’ & Officers’ insurance then please contact your local Coversure office.