Chief Underwriting Officer
The UK is a global leader in the creative industries, generating £100 billion to the UK economy each year and employing over 2 million people. The creative industries have been at the forefront of technology adoption. The advertising industry is a clear example of this: print, broadcast and outdoor still play their part, but digital now makes up 95% of advertising spend, while mobile accounts for 38% of all digital advertising. Capturing and processing the right data is key to reaching and engaging with target audiences.
But alongside these advantages comes a constantly developing combination of new and sometimes complex risks. Incumbent insurers are often slow to adapt their covers and take the reins when it comes to educating businesses to technology-related risks, so agencies that don’t take ownership of understanding their risks - or use a specialist broker to get appropriate cover - can be left unprotected against major risks.
Common risks faced by agencies
All agencies face a range of fairly similar risks, but these will vary according to the nature of your business and the way you do things. Below, we’ve listed some of the most common risks that creative agencies face.
This isn’t an especially new issue per se but it remains a big one. While some degree of human error is unavoidable, in some scenarios even a seemingly small data entry error can cause major issues. Organisation is all-important for agencies, and juggling multiple clients and projects is no easy feat - so an administrative mix-up can be potentially disastrous to your business.
This is the act of damaging an individual or company's reputation through the use of libel or slander. Those most at risk are broadcasters and publishers, who are regularly publishing content, however as many companies now use social media and blogging sites to promote their business online, they are also at risk of receiving a claim of defamation. While some claimants use defamation law to constrain legitimate reporting and criticism, in other cases you may unintentionally defame someone.
Intellectual property infringement
This can arise if you use third party materials such as images and music in content without having the appropriate permissions to do so. For example, let's say your company produced a piece of marketing collateral for a client using a photo that was sourced through google images by an intern. The ownership was overlooked and no one obtained the appropriate permissions to use the photo. Your client could be sued and, more often than not, this would result in your client taking legal action against you.
Refusal of payment
What if a client refuses to pay your fees due to a complaint about your service, dissatisfaction with your work or simply to avoid their contractual agreement by claiming negligence? Whether you did anything wrong or not this leaves you in a difficult situation, in need of legal support and potentially out of pocket as a result.
Big little mistakes
Small but deadly. Spelling mistakes, inaccurate pricing, typography/layout errors, or omission of vital information are little things that could cause massive damage to your reputation. This is an issue that we see frequently with our media and marketing clients but fortunately it can be recoverable if acted upon quickly. Professional indemnity insurance can help cover the costs of reprinting any materials and if the error isn't spotted in time, it can also cover any loss caused to your client as a result of the error.
What business insurance do agencies need?
Now for the good news - for every risk listed above, there’s cover to help ameliorate the consequences of that risk.
Professional indemnity insurance
It's your job to come up with big, new and sometimes controversial ideas. But what if they don't work out and your client doesn't get the results they expected? Worst case scenario, you could face a legal claim and compensation, which is where professional indemnity insurance (PI), also known as errors and omissions insurance, comes in. Designed for any business offering a professional service or advice, professional indemnity insurance will protect you if:
You make a mistake
Or if a client suffers – or claims to suffer – a financial loss as a result of your work. If this happens, professional indemnity insurance will cover your legal expenses and compensation costs.
You infringe industry regulations
For example, if your work includes television commercials, the contractual obligations of the commercial producer are defined by the APA/IPA Production insurance briefing schedule (PIBS) - failure to meet these obligations could result in significant costs and penalties. In situations like this, professional indemnity will cover your defence costs and resulting fines, many of which are insurable.
You become involved in an intellectual property dispute
Whether protecting your own intellectual property, or defending an infringement of somebody else's. That could be using images or music without permission, or infringing on another company's branding or logo.
Finally, you may also find that clients insist you have professional indemnity cover – so it could even help you win business (or not lose it!)
Media liability insurance
Similarly to professional indemnity insurance, media liability insurance is designed for the unique needs of media and advertising businesses, protecting you for infringement of intellectual property, breach of confidentiality or right to privacy, breach of comparative advertising regulations, slander or making false or misleading claims. So, if you're faced with a #fail on social media, a client's website, or another online or offline channel, any legal claims and compensation may be saved by this particular cover.
Data plays a crucial role in all areas of strategy for the modern creative agency, from managing research, to implementing digital and mobile campaigns, or running social media accounts. This means that a cyber-attack or data breach could have serious consequences.
In fact, the 2020 Government Cyber Security Breaches Survey found that nearly half of businesses (46%) in the UK were hit by at least one cyber-attack in the 12 months. Despite this, only 11% have specific cyber insurance policies.
Cyber insurance offers protection for:
- A breach of data protection laws (where insurable by law)
- Your liability for handling data
- Extortion and system rectification costs
- PR expenses and financial loss due to system downtime.
Directors' and officers' insurance
Directors' and officers' insurance (D&O insurance) covers allegations that you have personally done something wrong in your role as Director. Many founders don't realise that, even in a limited company, you can still personally face legal action, fines, or even prison sentences! You can also be disqualified from being a company director. Furthermore, investors often ask about D&O insurance as part of their due diligence process, so getting it sorted early shows you take your responsibilities seriously.
Employers' liability insurance
In advertising, your people are everything. So, as soon as you take on staff – whether on permanent, part-time, freelance or contract basis - you are legally required to have employers liability insurance. Employers' liability insurance will cover you if an employee claims they sustained an injury or became ill as a result of working for you. It will also help you avoid potentially expensive fines to the Health and Safety Executive, whose job it is to ensure you fulfil your responsibility as an employer.
Public liability insurance
Public liability insurance is another basic requirement, protecting your business if you or one of your team causes injury or property damage to a third party. For an advertising agency, you could be at risk while out shooting your latest video or TV ad, implementing a quirky stunt or simply visiting your clients' offices, or attending industry events. Even if you're mainly home-based, public liability insurance may be relevant to you as you may find yourself working elsewhere from time-to-time, or working clients at your home office.
Business contents insurance
Your valuable equipment also needs protecting, whether that's a simple laptop, camera, or filming equipment. Business contents insurance covers everything in the office, including your fit-out, computers, office equipment, furniture and documents. You should also consider portable equipment insurance, which covers everything you and staff take out and about with you, such as laptops, mobiles, cameras and tablets.
Creative work is exciting, but the flip side is that there are plenty of constantly developing risks to consider. Ensuring that you regularly review your risks and your business insurance is a good way to protect your future.