Miscellaneous professional indemnity
In this chapter of our Annual Insurance Review 2023, we look at the main developments in 2022 and expected issues in 2023 for miscellaneous professional indemnity.
Key developments in 2022
Last year we were still in the grips of the COVID-19 pandemic and predicted that lockdowns and new variants were likely to mean that HR and IT professionals continued to face a greater risk of claims in 2022. It is clear that 2022 has not been as overshadowed by COVID-19 as was feared. However, the continued economic impact of the pandemic, the repercussions of Brexit and the war in Ukraine has triggered a significant impact on the economy in the UK.
IT professionals (and their customers) remain exposed to the ever-increasing risk of cyberattacks on businesses and are blamed for insufficiently robust systems. It is estimated that 95% of cyberattacks are caused by human error and according to the Latest 2022 Cyber Crime Statistics (updated in October 2022), there are an average 97 cybercrime victims per hour.
There has been some positive news though on data protection. In the last few years, we have seen an increased number of claims against businesses and professionals for minor data breaches, disguised as breach of privacy claims (thereby allowing claims companies to sell such claims to lawyers who could rely on CFAs). However, in Lloyd v Google the Supreme Court rejected the idea that claims could be brought with no evidence of actual damage, and Warren v DSG Retail Ltd has indicated that an accidental data breach could not be brought as a breach of privacy claim. The recent decision in UI v Osterreichische Post AG has clarified this; the mere fact of a breach of GDPR is not itself damage.
What to look out for in 2023
The International Monetary Fund (IMF) believes we are about to enter one of the worst recessions on record. Inevitably that will have consequences for everyone.
Property prices are falling, utility bills are rising and there appears to be a significant lack of rental property available (pushing up the prices in many areas for those who rent). We predict that 2023 could be a very difficult year for those involved in the property market – estate agents, property managers and rental companies. Advising on the levels of rent to charge if utility bills keep rising when fixed rents are in place is likely to prove difficult and expose those entities to potential claims.
IT professionals will need to ensure that they regularly review clients' IT security to try to stay one step ahead of criminals to prevent the sort of data breaches that have serious implications for insurers.
Advisors may find themselves vulnerable as the companies they advise struggle in difficult financial conditions. Whilst some claims may be spurious, attempts may be made to seek recoveries from company advisors/consultants for financial losses.
On a positive note, however, in light of the helpful case law from 2021 and 2022 on data breaches, we hope to see a continued decline in the number of low-level data breach claims generally as lawyers struggle to justify the level of costs that would be incurred in those claims, and claimants find it hard to evidence damage.
Written by Joanna Makin.
Download our full Annual Insurance Review 2023 for more insights.