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  • D&O Insurance claims are on the rise

    D&O Insurance

    Whilst most organisations are protected through public liability and other insurances, the individuals working within the company are not protected. This is where D&O Insurance comes in to protect the individuals as well as their own personal assets which may be at risk.

    More and more claims against Directors are becoming increasingly common, and whilst the company may choose to indemnify the Director and pay for appropriate representation, the cost of D&O Insurance is far less.

    Here are some reasons why Director’s and Officer’s claims are on the increase.

    Increased government legislation

    With the rise in government legislation, claims against directors are becoming more frequent and expensive. The number of actual health and safety prosecutions has in fact tripled since the new guidelines for the Sentencing Council came into place in February 2016. In addition to this the total value of the 20 highest fines in 2016 was more than the value of all 660 prosecutions in 2015-16 put together.

    Cyber security has affected D&O Insurance

    Cyber-crime is another reason for the rise in claims against directors and officers. Company Directors are held personally liable for over 200 different offences whilst acting on behalf of a business and prioritising cyber security is one of them. With data breaches becoming more common and high profile the need for increased diligence is rising.

    Statistics show that in 2016 each UK business was effected as many as 230,000 times by cyber-attacks, heightening the risk of directors and officer’s responsibility to enforce cyber defence.

    According to a recent survey 73 per cent of directors and officers are regularly now discussing cyber security policies. However only 57 per cent of UK organisations have acted to identify and protect against such attacks. This leaves directors open to being held personally liable for not prioritising cyber security.

    How cyber security affects claims

    Claims in this area may arise if a company is taken into insolvency because of a serious data breach, or following a takeover after a data breach. Companies such as Adobe and Sony have faced multiple claims against the company and their directors in such instances.

    A compensation culture

    In today’s compensation culture, directors can be exposed to legal and financial responsibilities should someone choose to act against an organisation. However, with a D&O Insurance (Director’s and Officer’s Insurance) policy they will benefit from comprehensive protection against the costs of defending litigation and any damages that may result from action taken against them.

    Often for many businesses this can mean the difference between being able to continue trading or not.

    Reasons your business needs D&O Insurance

    Many smaller businesses think that they do not need D&O Insurance, as well as a number of other common myths surrounding D&O Insurance. It is estimated that less than a third of SMEs in the UK have D&O Insurance.

    Here are some of the reasons why your business should consider D&O Insurance:

    • To reduce the liability exposure of your Directors and Officers and organisation as a whole
    • To cover the additional risks that a public liability policy doesn’t
    • To protect against liquidators who expect wrongful trading
    • To cover costs when HSE investigations suspect negligence
    • To protect against police investigations where fraud is expected
    • To cover against claims from investors or shareholders if they make losses
    • Remove a barrier to recruiting top board members
    • Free directors and officers to make tough decisions
    • To gain a third-party view of employment policies, practices and procedures
    • To remain in business despite the hefty costs of defence and damages
    • To protect against the rise in D&O Insurance claims

    For more information on managing your companies D&O risks, contact our Bluedrop specialists.

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