Professional liability insurance for consultants is not a luxury

With the changing trends in the economy and job market, more professionals are venturing into the consultancy business, to grow their careers, earn more income, become financially independent, or even just to actualise a passion or hobby.

A consultant is any person who provides specialised services to a client ranging from providing information, solving problems, proposing actions, or selling products.

However, consultancy or any business that involves providing professional advice comes with its unique risks. Negligence by a consultant or a professional advisor, for instance, could occasion serious financial or business loss to a client.

To put this into perspective, an engineer supervising the construction of a building that collapses killing or injuring people may be exposed to a lawsuit for professional negligence. A doctor who misdiagnoses an ailment leading to the death of a patient may be sued for negligence. Errors by an accountant could mean the loss of millions of shillings to a company.

Most consultant-client relationships are governed by a contract. The latter comes with implied terms, one of which is that the advisor must exercise reasonable care in providing services. However, even the most experienced professionals do make mistakes resulting in financial and legal liability claims by clients and third parties.

With more people aware of their legal rights, coupled with an increase in the size of court awards for personal injuries or business losses, professionals like doctors, architects, accountants, engineers, lawyers, IT experts, and financial advisors, to name a few, are now more exposed to serious financial liability in the course of their work.

This is where insurance comes in to address the risks associated with malpractice or negligence. Specifically, Professional Liability Insurance (PLI), also known as Professional Indemnity Insurance (PIL), is an insurance policy protecting against risks and financial liability arising from malpractice or negligence.

PLI covers against unexpected situations that could lead to financial loss for anyone providing specialized services. Considering that many professional consultancies in Kenya are small firms (SMEs), the likelihood of insolvency in the event a court awards damages running into millions of shillings to a client is quite high. PIL policies cover an array of risks including court awards, legal fees, and expenses.

At AAR Insurance Kenya, we have seen a trend where more professionals in private practice are keen on taking out professional indemnity covers. We often advise our customers to take into account the unique risks underlying their businesses in coming up with the appropriate risk coverage.

Among the benefits of PIL policies include offering the last expense cover and continuous coverage in retirement.

With digital insurance, purchasing professional indemnity cover has never been easier. You can get a PLI cover in under five minutes online from the comfort of your office and home. Even if you work from home, or operate a side hustle, you still need the peace of mind that comes with an indemnity cover against claims by clients.

Also, in an increasingly litigious society with the heightened media scrutiny, professionals must protect their reputation which is often one of their most valuable assets. The underwriter works closely with the client to deal with claims by clients and third parties thus limiting unnecessary negative publicity.

A PLI policy also enhances the profile of your consultancy as some clients, especially corporates and multinationals require their consultants to be insured against professional negligence. Therefore, one should not think of such an insurance cover as an expense but as a financial tool to grow their consultancy business.

Ms. Ndegwa is the Chief Operations Officer, AAR Insurance Kenya

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