Management consultant insurance, and what insurers publish

What insurers print for this trade

The terms that matter on a consultancy policy

1. Check the limit is per claim, not in the aggregate. A limit expressed in the aggregate is exhausted by a run of claims in the same year, while any one claim wording restores it for each separate matter. Public sector frameworks often specify which they require, and the two are priced differently for a reason.
2. Look at how defence costs are treated. Some wordings pay defence costs in addition to the limit and others take them out of it. On a professional claim the defence cost is a large share of the bill, so a limit that has to fund its own defence is smaller than it looks.
3. Confirm retroactive cover for past engagements. A claims made policy only reaches back to a retroactive date. If you switch insurer, the new policy must pick up the work you did under the old one, or the years you have already been paid for become uninsured overnight.
4. Plan run off before you wind the company up. When a consultancy stops trading the claims do not stop arriving. Run off cover keeps a policy in force for a period after the last engagement, and it is far easier to arrange with the incumbent insurer at renewal than after the company has closed.
5. Declare any interim or executive roles. Taking an interim management or director role for a client is a different exposure from advising, and it may need directors' and officers' cover rather than professional indemnity. Insurers ask about it because the two policies answer for different allegations.

Common questions

What does management consultant insurance cover?

Professional indemnity covers claims that your advice, reports or project work caused the client financial loss, including the cost of defending the allegation. Most packages add public liability for client site visits, office contents, cyber and legal expenses.

What is run off cover and do I need it?

Run off keeps a claims made policy in force after you stop trading, so that a claim about earlier work still finds a live policy. Any consultancy that closes, merges or is sold should arrange it, typically for a period of years rather than months.

Does the policy cover work my associates did?

It can, where associates and subcontractors are declared. Insurers ask whether they carry their own cover and whether your engagement letters pass liability on, because an undeclared associate network materially changes the risk.

Do public sector frameworks set insurance requirements?

They usually do, naming the limits required for professional indemnity, public liability and employers' liability and sometimes requiring cover to be maintained for years after completion. Read those clauses before bidding rather than after winning.

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