The majority of Brazilian companies are unfamiliar with some of the types of insurance that could reduce their risks in business management. And contrary to what many managers imagine, a recession is not the time to reduce policies and coverage, but exactly the opposite. This is the most vulnerable situation where risks rise and claims can be made.
A policy that requires little in the way of contract handling is Professional Indemnity, also known as PI or E&O (Errors and Omissions).
Every company, no matter how small, relies on the work of some service providers during its operations, as well as lawyers, accountants, engineers and architects (during building works and refurbishments), human resources, and travel agents among others. These individuals can make mistakes that can cause damages to the company during the undertaking of the works.
An example of this is tax consultation. With frequent alterations in the rules of rates and exemptions, the individual can mistakenly provide advice that results in incorrect tax calculation causing penalization from the Inland Revenue/IRS (Receita Federal). Depending on the value, it is unlikely that the individual will have sufficient assets to repay their client. The Professional Indemnity policy protects the assets of the service provider and the risks of the business. This is done by requiring an exclusive policy to serve their contract needs that will provide quick compensation by the insurer should the damages be proved as being due to professional error.
The policy avoids long and onerous legal disputes and brings security to both parties in the contract. Requiring this type of insurance is not proof of lack of trust in the service provider. All parties can cause errors and good risk management to map these situations uses all the necessary resources to reduce or neutralize them.
In the American market, it is extremely common to require a series of policies as a condition of the contract handling. Among them there is always the obligatory E&O, even if the service provided is of low complexity resulting in a very low risk. This requirement is normal in developed markets and in terms of the stage that the Brazilian market has reached, it is time for executives to get to know all of the tools available in the market to carry out good risk management.
An important detail to note is that this policy doesn´t include direct cost to the company. The coverage is taken out by the service provider and the insurance premium contains justifiably low rates bearing in mind the protection that it provides.