Professional services are occupations in the tertiary sector of the economy requiring special training in the arts or sciences. Some professional services require holding professional licenses such as accountants, architects, lawyers, engineers, and doctors. Other professional services involve providing specialist business support to businesses of all sizes and in all sectors which can include tax advice, supporting a company with IT services or providing management advice.
we can break “Professional Service Firms” (PSF) into three groups:
Classic PSFs (e.g. law and accounting firms): high knowledge intensity, professionalized workforce, low capital intensity
Neo-PSFs (e.g. management consultants): high knowledge intensity and low capital intensity
Professional Campuses (e.g. hospitals): high knowledge intensity, professionalized workforce, high capital intensity
The US and European Union are the largest markets for professional services but firms are expanding in emerging markets in China and India. The US professional services industry includes about 900,000 single location and multi location firms with a combined revenue of roughly $1.7 trillion.
Why is Insurance for Professional Services Organizations Important?
Just as a manufacturer is worried about products liability and a construction company is worried about workers compensation, PSFs have to deal with their #1 exposure head-on.
The threat we’re worried about is a lawsuit from customers or other counterparties who were financially harmed by the performance of (or failure to perform) professional services.
Any one of a company’s clients can claim financial loss. Some examples:
those who sue their accountants after being audited by the IRS after inadvertently underpaying their taxes;
those who sue their lawyers for failing to competently represent them in court;
the patients who sue the company who ran the clinical trial in which he or she participated and was subsequently injured;
the developers who sue their architects after the city forces them to halt construction due to zoning restrictions;
the data warehousing company who sues their cyber security consultants after hackers exploit an unforeseen weakness in the new system;
the high-growth company that sues their insurance brokers for…
Cyber and privacy liability is important as well. By their nature, many PSFs collect sensitive data including PII or interact in some way with their clients’ network or systems. If data is compromised or hackers get to a client through you, your liability could be massive.
Once we move out of the E&O world, however, these companies start to look similar to any other. Most states require employers to purchase workers compensation insurance for their employees. Companies with a high percentage of physical labor on the payroll will have to pay close attention to their workers comp premium and coverage.
The importance of computers and system integrity for e-commerce companies cannot be overstated, so let’s start with some of the risks insurance addresses. The theft of customers’ personal info — or worse yet, their financial info — is a looming threat for online retailers. Bad actors can wreak havoc by stealing data, encrypting your data and extorting you, or shutting you down with a DDoS attack. These challenges can cause lasting damage to a company who isn’t prepared to face them.
Legal liability and the potential for lawsuits is among the top concerns facing professional services companies. These risks include professional liability, such as errors and omissions and other professional mistakes. 19% of professional services firms said they worry about customer slips, trips, and falls.
The most common cyber risks among professional services businesses are security breaches and their computers being damaged or going down. Professional services firms also face professional liability risks from cyber attacks. 62% of professional services firms cite cyber risk as their top risk.
Driving accidents caused by employees who use their own vehicles for work may lead to legal liability. 71% of professional services companies report that they use personal vehicles for company business but only 41% report that have commercial auto coverage as part of their insurance.
Recommended policies for Professional Services companies
These coverages form the foundation of any risk management program for ecommerce companies
General liability offers broad protection against some of the most fundamental risks companies face. Known as “slip-and-fall” or “all-risk” insurance, this policy covers personal or property damage and bodily injury occurring on the business premises.
Cyber insurance protects companies from third-party lawsuits relating to electric activities (i.e., phishing scams). Plus, it offers many recovery benefits, supporting data restoration and reimbursement for income lost and payroll spent.
Employment Practices Liability Insurance
Any company with employees faces the risks of allegations, such as discrimination, wrongful termination, breach of contract, etc. This coverage protects companies against lawsuits related to employment practice
Professional Service Companies Specific Coverage
These policies are essential for or can be tailored to the needs of companies operating in the ecommerce space.
Intellectual Property Insurnace
Companies are often accused of infringement or face being infringed upon, putting their budget and intellectual property at risk. This policy covers legal fees and offers enforcement coverage, no matter how grounded or not the claim is.
Directors & Officers Insurance
Shareholders, competitors, investors, etc., can sue a company’s directors and officers, putting their personal assets at stake. Directors and officers (D&O) insurance protects these assets from lawsuits alleging leaders of wrongful acts managing the business.
Whether employees steal from you, a thief robs your armored car, or you receive a forged check or fraudulent wire transaction, money theft happens in many ways. Crime insurance guards your company against damages from these particular crimes.
Types of Ecommerce Companies that need insurance
- Direct to Consumer
- Third-Party Logistics
- Subscription Ecommerce