A leading professional indemnity insurance provider, has warned IT contractors and consultants that the downturn in the economy could lead to more compensation claims against them.
During economic downturns, companies are often force to cut existing IT spending, and sometimes in order to break existing contracts or to reclaim project funds, they may claim for breach of contract against their IT contractors / consultants – alleging that the service provided “didn’t meet their expectations”.
Breach of Contract
Hiscox, the specialist business insurer says that breach of contract claims in the IT sector made up over one third of all its professional indemnity claims over the past 4 years.
Looking at the largest claims Hiscox has processed in recent years, the main causes were:
- claiming defective services of products
- inadequate project management
- inadequate initial project scoping
As a result, contractors are being urged to provide realistic costs and timelines to clients, research and accurately scope all projects before signing contracts, and carefully project manage clients throughout the project life cycle.
Adequate PI Cover
Sam Franks, specialist IT risks underwriter at Hiscox, told us:
“Many IT companies also do not realise that their existing professional Indemnity insurance may not provide adequate cover. It is absolutely critical that IT contractors and companies, from the one man band operators right up to the multi-million pound IT businesses, check that their cover provides for breach of contract.”
You can get a PI quote right away – simply visit the Hiscox website here.
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