quote
menu

D&O cover: directors and officers insurance explained


D&O (directors’ and officers’) insurance is often associated with larger companies, but it actually covers risks commonly run by SMEs.

If you run a small or medium-sized business, the chances are you have staff who don’t fit into neat little boxes, but have combined, dynamic roles. That’s part of the entrepreneurial spirit and the way small businesses grow fast and get rich quick.

But an entrepreneurial atmosphere can also leave SMEs vulnerable because often there isn’t the resource to ensure a systematic and comprehensive approach to compliance and risk management.

Anyone who owns a company or is in a managerial position is in real danger: a claim made against your actions could not only wreak havoc to your business, but also see your personal assets under threat. D&O cover can be invaluable in protecting SMEs.

A case in point: beauty turns ugly

Beauty therapist Anita Newman, who set up a salon with two friends is an informative example of how things can go unexpectedly wrong. The business was a roaring success and the team ended up taking on several employees within the space of a few months. The company’s reputation grew, and Anita and her partners were making a good return on their investment.

Then the problems started. One of Anita’s employees was a very difficult person, whose attitude resulted in several client complaints. The salon’s reputation started to suffer, and Anita and her partners made the reluctant decision to let the employee go.

The employee took her dismissal very badly. She claimed that it was unfair, and that Anita had always had a personal grudge against her. This was very distressing for Anita, who was exhausted from working overtime in the salon, as well as managing the accounts and other staffing issues.

Things went from bad to worse when, with the help of a ‘No Win No Fee’ lawyer, the ex-employee pressed charges for age discrimination. The claim was successfully upheld, and Anita had to sell her flat in order to meet the legal costs.

Had Anita and her clients had an HR department, these issues may not have arisen – but a growing business doesn’t have the luxury of dedicated professionals in every area, and is therefore very vulnerable.

Grey areas and cyber menaces

Hiring and firing isn’t the only weak point for SMEs. Managers and directors (or anyone acting in these roles, however temporarily) can also be held personally responsible for:

  • accidents that occur due to perceived negligence
  • shareholder losses
  • employee harassment or bullying

A growing concern for all business, but especially SMEs, who don’t tend to have dedicated IT teams, is the issue of data protection. Smaller businesses are attractive to cyber criminals because they generally hold more information valuable than individuals, without the resources to protect it.

Pete Fairly had a medium-sized manufacturing company specialising in alarm systems. As the business grew, he was storing more and more client information on file, including names, addresses, and even bank account details. Because the data was password-protected, Pete assumed it was safe.

Over the Christmas holidays, cyber hackers cracked Pete’s files and sold the sensitive information to third parties, who then managed to swindle some of Pete’s clients out of significant sums of money – in his name. Pete found his personal assets under threat as he battled to meet the legal costs.

Again, a dedicated IT team might have prevented this unfortunate chain of events. But it was financially unviable for Pete to employ a whole department, as is the case for most small and medium-sized businesses.

The sad fact is that SMEs are attractive to criminals because they’re big enough to have significant revenue and client data, while small enough to lack protection.

D&O insurance is designed to cover this gap and help owners and directors of small and medium-sized businesses to feel secure enough to make decisions with the entrepreneurial flair they need to get ahead.

 

Related Articles

DCP228 and Business Electricity

What is DCP228? DCP228 is a regulation to be introduced by Ofgem in April 2018 which will change the way busin...

Read More
energy news

DCP 161 – Excess Capacity Charges

If your business uses a Half Hourly (HH) meter for its energy supply, make sure you’re ready for DCP 161...

Read More
Scottish Power logo

Total Gas & Power

Total Gas & Power is a business energy supplier, wholly owned by Total SA. It has been a leading business ...

Read More
Excellent, 9.8 / 10

Mark W was really helpful and gave…

"Mark W was really helpful and gave excellent advice and customer focused service. Thanks you."

This review was posted by Adam on the 25th of April 2018

Really helpful

"Really helpful, clear advice from their assistant Bhavni, and an easy switch to a new electricity provider. Many thanks!"

This review was posted by Mrs Farley on the 25th of April 2018

Friendly, helpful staff

"Cheryl was really helpful and nothing was to much trouble as it took a few calls to finalise the switch to new supplier. Hope to save a few pounds with new provider."

This review was posted by Mary Southwell on the 23rd of April 2018

I had a really good experience with Ian…

"I had a really good experience with Ian Howell ext 2884 who works there. Great service, great price, recommended !"

This review was posted by Stephane vander elst on the 24th of April 2018

Fantastic service from Jess Purnell…

"Fantastic service from Jess Purnell today. Having used your very straightforward website I had an immediate phone call, Jess was very knowledgeable, professional and easy to deal with. She talked me through the options, explained the different elements of the quotes, and was able to secure me a good rate on a 2 year contract. Thank you"

This review was posted by Jackie Gilmore on the 24th of April 2018