MPR offers a financial lines package policy to protect the assets of Partnerships against the risks associated with their operational environment.
Protection of the assets of both the partnership and the partners, along with other organisations and managers with the structure of the business is vital within an increasingly challenging operating environment. The Management Risks Insurance package policy is an integrated solution and provides five important sections of cover, each with its own limit. This delivers a quick and easy to place solution for partnerships.
Why do your clients need Management Risks Insurance?
- Partners, members, directors, officers and senior managers can be exposed to a broad spectrum of risks. Specialist lawyers do not come cheap and hourly rates can be many hundreds of pounds.
- Good human resources practices can go a long way to mitigate exposures to claims by employees but cannot eliminate them completely.
- Although a partnership has no separate legal personality, it is well established that it can sue and be sued in the firm name.
- Keeping pace with change, accelerated by technology, can be challenging and difficult. Insurance can provide valuable support during this journey.
- According to the Association of Certified Fraud Examiners, the average organisation loses about 6% of its total annual revenue to fraud and abuse committed by its own employees.
- Even partnerships with strong security and privacy controls are not immune to cyber risks.
What does the policy cover?
A comprehensive package policy providing cover for:
- Partners, members, directors and officers insurance;
- Employment practices insurance;
- Partnership insurance;
- Employee Crime, Crime using Computers and Social Engineering Crime;
What limits are available?
Your clients can choose the limits they need for each area of exposure as each section has a separate limit.
The limit for Cybersecurity is fixed at £25,000 (higher limits or broader cover requires a dedicated wording, also available from MPR).
What does an underwriter like to see?
- Comprehensive and robust risk management strategies.
- Organisations with good checks and controls in place, such as:
- HR background checks and reference procedures;
- written policies on discrimination, harassment, discipline and termination;
- call back procedures for phone transfer requests;
- structured procedures around bank account changes;
- dual controls.
Is there anything an underwriter wouldn’t insure?
- Newly established partnerships may need more focus to get a better understanding of the dynamics and risk profile.
- The policy contains exclusions to remove disputes that are not in the scope of this kind of insurance. These include professional liability, disputes over partnership agreements and non-appointment of partners,
- Whatever the risk, underwriters will always try to find solutions, even if the policy terms may be more cautious and reflective of the risk characteristics.
Why choose MPR?
- Deep experience over many years in all the products we underwrite
- Simple and clearly stated policy language with the removal of ambiguity
- A straightforward, broker focussed, technical and service based proposition
- Strong financial rating
- Feature Comprehensive cover
- Management liability insurance for partnerships has never been as widely available as it has been for incorporated organisations. This policy delivers a strong solution across a range of exposures that partnerships face.
- Important cover for the partnership itself
- The cover provided by this section can provide valuable protection in many areas and defence costs for a number of scenarios, including regulatory actions.
- Cover for ‘cyber liabilities’
- This policy is not a substitute for a Cyber insurance policy. However, it will deal with many of the ‘cyber’ liabilities that the internet and e-commerce have opened up, some of which include:
- Claims for copyright, trade secret and other intellectual property infringements;
- Defamation claims;
- The risk of investigation by The Information Commissioner;
- Claims and investigations for privacy and data breaches;
- Computer fraud and funds transfer fraud losses caused by third parties; and
- Costs of handling ‘cyber’ extortion where someone threatens to interfere with data or to disseminate customer records.
- Previous policy cover option
- Changing management liability insurer is a lot easier than it used to be. Whilst there has never been any obvious impediment to switching to a stronger product offering, bewildering use of jargon and statements of capability can nonetheless create some room for doubt. Allowing an optional ‘look back’ provision in a policy permits a previous policy to be used to interpret a claim made on a superseding form. It is a far from perfect science, but it can provide some comfort where it is required.
What can go wrong?
The operational environment continues to pose existing and new challenges for partnerships.
Partnerships are subject to many of the new and existing laws, which make no distinction between incorporated and unincorporated organisations. Changes to areas such as the Minimum Terms, as well as the development of themes such as social engineering fraud, put partnership assets at risk on a daily basis.
Employment practices claims (single claims, rather than multiple claims primarily for equal pay and holiday pay) have declined by 79% since the since the introduction of fees in 2013, and those for unfair dismissal almost halved.
Whilst the impact of the change on fees was welcomed by employers, The Supreme Court decision in July 2017 on the abolition of the Employment Appeal Tribunal Fees Order 2013, will inevitably lead to an increase in activity at employment tribunals and a decline in the effectiveness of Early Conciliation.
The biggest single factor continues to be where the employer has failed to follow process, not whether they are right or wrong.
A supplier to a law firm notified irregularities in respect of a member of staff. An internal investigation followed and confirmed that the employee was receiving irregular and unauthorised commission payments from some of the suppliers to the firm, all of whom he had introduced. The employee was making arrangements with some of these suppliers to inflate their invoices in order to maximise his ‘commissions’, as well as putting in place arrangements for work to be done by these suppliers for other organisations, which were connected to the same employee. The loss to the firm from these payments exceeded £160,000.
Supplier and vendor fraud, including ‘ghost’ companies, are major sources of employee fraud. A straightforward controls framework around appointment of new suppliers would have extinguished the opportunity to perpetrate the fraud, and dual controls would have also mitigated the effects. Left unchecked over a period of year, overcharging for services rendered and charging for services that were never performed accrued to a significant and meaningful amount.
Regulatory bodies, including the SRA, continue to represent a financial risk to partnerships.
It is helpful to know that, if the worst happens, there is a product specifically crafted to accommodate the consequences of these unforeseen and undesirable events. Regulatory investigations can be stressful and difficult and will carry a cost. Having a policy written around the partnership structure has the potential to deliver a meaningful benefit to firms, or structures with firms in their organisational framework.