Wondering what types of insurance your Recruitment Agency might need to make sure you're fully covered for all situations? Today we'll take a look at the different classes of insurance from a recruitment perspective, break it down for you and give some examples along the way.
At Lockton, we specialise in arranging bespoke recruitment insurance policies and can provide the complete package of covers under our newly developed exclusive facility of everything you see below.
Public Liability
Public liability covers the cost of compensation and defence cost from claims made by third parties for their personal injuries or loss and damage to property.
Public liability is sold with limits of either £1, £2, £5 or £10 million. Smaller agencies typically purchase lower limits. However, be sure to check your contractual agreements before you decide on the limit you wish to purchase so that you do not breach your contract terms.
An example of a public liability claim: if a candidate visits your office and trips over loose cables they could potentially claim against your business for their personal injury. If you were to be proved negligent then this insurance would pay your defence costs and any successful compensation claim for injury.
Employers liability
Employers liability provides insurance for the cost of compensation and defence cost for claims made by employees who are injured whilst working for yourselves. This type of insurances provides cover for all your permanent, temporary or volunteer employees.
If you are an employer you are legally obligated to have employers' liability insurance. You can be fined up to £2,500 for every day that you do not have this insurance. The minimum level of cover required by law is £5million. However, most policies provide £10 million as standard.
Claims example: If an employee slipped on some spilt water in the office or carpet that was not fixed down properly there is a possibility that they could claim on the employer's liability policy for their injury. This policy would provide cover for defending the case and any successful claim payments to your employee.
Professional indemnity
Professional indemnity insurance protects agencies from claims made by hirers for loss and damages caused by services provided by your business or negligent advice that you offered.
In the recruitment industry, the limit of indemnity is usually written on any one claim basis. This means that if you currently carry a £2million limit of indemnity, for every claim you receive you will always have a £2million indemnity limit regardless of the number of claims you receive that year. While some policies are arranged on an aggregate basis not an any one claim basis, we believe that this basis of cover is not ideal for an agency as it means that you only have just a total of £2 million cover for all the claims you will receive that year.
The limit of indemnity that an agency purchases is normally determined by the contract terms that you sign.
Claims example: There are several ways a professional indemnity claim could arise in the recruitment sector. One of the most common would be a misrepresentation of a candidate to a client. If a recruiter provides a candidate that does not hold the correct relevant qualifications and the agency has not carried out the necessary due diligence checks then can be held liable by the hirer and potentially a claim could arise.
Directors & Officers liability:
Directors & Officers Liability, commonly known as D&O insurance, provides insurance to directors and senior officers for alleged wrongful acts within the business that causes a loss to other parties such as breach of fiduciary duty resulting in financial losses or bankruptcy, misrepresentation of company assets, fraud and failure to comply with workplace laws. This insurance would cover the cost of compensation to the other party for the loss as well as defence costs.
An example of a claim could be: If a company misrepresented its financials to secure an investment which then resulted in a financial loss to the other party, the company and its directors may be held liable for misrepresentation, consequently a claim could arise from the investors. D&O would cover the legal cost in defending the claim, as well as any compensation due.
Cyber Liability
Cyber liability protects your business for a number of cyber incidents that your agency could suffer. One of the most common forms of cover is breach or loss of data from systems or networks. Cyber can be broken down into 2 different types of cover, first party and third party cover.
First-party insurance covers the assets of your business (your own assets). This coverage is adequate for firms just protecting themselves against everyday cyber risks. Third-party insurance is designed to cover the assets of others, typically your customers.
The typical level of cyber cover a recruitment company may buy is dependent on their size and the number of data records they hold, there is no minimum limit.
Claims example: A recruitment agency's IT system is hacked and a number of the personal details (e.g. names, addresses, financials) of the candidates are stolen from their system. This data breach would have to be reported to all the individuals that has had their data stolen and there would have to be monitoring of these individuals financials etc. All of this is a very costly process that the cyber policy would cover.
Property insurance
Commercial property insurance provides cover the cost of repairing your business premises or replacing equipment after an incident or a theft. Property insurance can be separated into different sections of buildings, contents, portable equipment, business interruption or money. Business interruption provides financial assistance if your income reduces or if you incur additional costs due to an insured event, such as fire, which has an effect on the trading of your business.
The typical level of cover that you may need to buy would be dependent on the new replacement cost of the premises, contents, laptops etc.
Claims Example: A recruitment agency's office is flooded and all computer equipment and contents are damaged. Also the office needs to be dried out. Property insurance would cover the cost of a repairing the office, replacing the contents and if there is business interruption cover the cost of hiring a temporary office elsewhere.
Personal Accident
This insurance provides cover to employees, employers, and contractors if an employee or contractor is injured due to an accident. This is paid either as a lump sum or a weekly benefit to help support employee wages, plus any ancillary costs such as retraining expenses or the cost of hiring additional staff.
The personal accident insurance will cover employees even when they're not at work, as long as the injuries that prevent them from working were an accident.
Claims example: An employee slips whilst at home and they can't work for 3 weeks. Personal accident cover provides a lump sum to the employer which could be used to pay the employees' wages as well as the cost of any temporary staff needed.
Legal Expenses
This insurance protects agencies against possible legal disputes and is usually found in most recruitment policies. Legal expenses covers the cost of defending potential disputes such as tax, health and safety and contractor disputes. This cover is particularly relevant to agencies as it normally includes cover for IR35, VAT and Tax Investigations
Claims examples: IR35 investigation by the HMRC.
Vicarious Liability
This extension to the insurance policy simply covers claims for negligence of another party which the agency is legally liable for. In certain situations and under contracts signed, recruitment agencies can be deemed legally liable of the actions of the temporary workers it supplies.
Vicarious Liability is an extension of the insurance program and is not standard within a recruitment policy.
Claims example: An agency supplies a bouncer to a club. The bouncer violently ejects a patron from the club, causing the patron serious personal injury. The bouncer was not following the orders of the club, and was an agency worker. The agency may be deemed liable for the actions of the bouncer and therefore be liable to the party that has suffered the personal injury. A correctly arranged vicarious liability extension would provide cover if sued by the injured party.
If you'd like to discuss your insurance needs, please feel free to get in touch.