Overview of the Professional Services industry

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.

Some of the biggest risks Professional Services firms face

Legal Liability

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.

Cyber Risks

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

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.

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.

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How much does Insurance for Professional Services Companies cost?

Various factors play a role in determining the cost of insurance for your professional services company. These factors include:

  • Location
  • Amount of coverage you select (ore coverage typically means a higher insurance premium)
  • Number of employees (your potential for a claim grows with each additional employee)
  • Number of years you’ve been in business.

Types of Professional Services Companies that need insurance

Law Firms

Allied Healthcare

Accountants / Auditors

Architects

IT

Security Consultants

Training / Implementation

Business Development

Insurance Brokers

Management Consultants

Professional Services companies we work with

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