Modern business pressures, hugely burdensome remits and continuous regulatory changes are exposing senior business executives like never before to liability claims.
Research by QBE Business Insurance found that the risk of prosecution, bankruptcy and jail terms is now firmly on the agenda. According to the findings, 1 in 4 (23%) senior decision makers have had a claim made against them at least once in their capacity as a senior manager, while a third (32%) admit to concerns about a claim being made against them in the future.
The research investigated the impact of increased responsibility among 2,500 business owners and senior decision makers across the UK, Spain, Italy, Germany and France. It revealed that over two-thirds (70%) of respondents said the remit and responsibilities of their role have increased over the past year, with 36% saying significantly so. Greater levels of business to support (60%), technology and an ‘always on’ culture (42%) and regulatory change (31%) were listed as key contributing factors.
Claims can be made against senior officers for a broad range of reasons and from a variety of parties. Employees can assert discrimination, shareholders can claim mismanagement or inappropriate behaviour can be investigated by a regulatory body. Aside from the significant costs of mounting a legal defence, if found liable, senior executives face prosecution, hefty fines, and jail terms.
Environmental factors are playing a part, notably the growing trend for personal liability claims being made against senior executives. Survey respondents said they felt there was a greater emphasis now on senior management’s accountability than before (34%). Of those that have had a personal liability claim made against them already, the claims largely related to technology (21%), competition (20%), financial (18%) or political/regulatory (9%) issues.
Carly Eveniss, portfolio manager for management liability at QBE Business Insurance, said:
“Senior executives are more exposed now than ever to liability claims arising from omissions and decisions made whilst acting in such capacity. Whilst this is in large part due to the expanding remit of their roles and external pressures like increased regulation, it is also symptomatic of a shifting culture whereby Senior executives are increasingly seen as legitimate targets for legal action as disgruntled parties seek the right to have recourse to the party they deem responsible.”
Eveniss continues “Year on year we are seeing an increase in the number of claims against directors and officers. Years ago, people wouldn’t have known who the senior people in businesses were, but the culture of personality means we increasingly know and often have very strong opinions on today’s leaders and we rightly hold them accountable for their actions”.
Despite the increased risk of a claim being made and the severe repercussions if found liable, senior executives have a poor understanding of the level of insurance cover that is bought on their behalf and typically take an arm’s length approach when it comes to their Directors’ & Officers’ policy.
Eveniss adds “It is staggering that in this heightened environment of executive accountability senior officers may not be paying attention to the details of the insurance cover that is all about their personal protection and can ultimately make or break them financially.”
D&O insurance covers such factors as the cost of legal proceedings for individuals, damages if the individual is found liable, civil fines and penalties and, to some extent, the entity itself.
Eveniss continues “Funds tend to get burned through quickly and a senior officer needs to know there will be enough money to cover lengthy proceedings and potential damages. Once the limit of indemnity is exceeded, the individual will have to cover any remaining amounts themselves.”
Concerns for the future
When asked to highlight the areas that concerned them most in the future, respondents highlighted technology as a key risk area. Cyber-attacks and data breaches were a primary concern for 34%. A fifth (19%) noted compliance with recent GDPR requirements as high on their list of worries. Other areas included; competition and profitability (24%), increasing regulation & government controls (18%) and financial turmoil (16%).
Download Carly Eveniss’s guide to what she would want to see in a D&O policy her employer was buying on her behalf.
About the research
500 respondents were surveyed each in the UK, France, Spain, Italy and German from a broad range of sectors and business functions. Overall, respondents had an average of 6 years’ experience in their current role.
Figures cited above are the merged results for all territories surveyed. Country specific results are as follows:
Has a claim ever been made against you as an individual, in your capacity as a business owner or member of senior
|
|
UK |
France |
Spain |
Italy |
Germany |
|
Yes |
20% |
27% |
21% |
25% |
20% |
What best describes what this claim related to?
|
Reason for claim |
UK |
France |
Spain |
Italy |
Germany |
|
Technology/digitalisation |
23% |
19% |
25% |
20% |
18% |
|
Competition |
19% |
25% |
19% |
24% |
11% |
|
Financial |
15% |
15% |
16% |
11% |
31% |
|
Political/regulatory |
15% |
15% |
7% |
15% |
9% |
|
Health & Safety |
5% |
10% |
8% |
9% |
9% |
Thinking about personal liability in your role as a business owner or member of senior management, which of the following statements do you identify with?
|
|
UK |
France |
Spain |
Italy |
Germany |
|
I have worried about the possibility of a claim being made against me. |
27% |
34% |
40% |
29% |
27% |
Thinking about the remit and responsibilities of your role, which of the following best describes how these have changed within the past five years (or since you have been working there if this has not yet been five years)?
|
Reason for claim |
UK |
France |
Spain |
Italy |
Germany |
|
Increased significantly |
29% |
37% |
35% |
47% |
32% |
|
Increased a little |
34% |
37% |
39% |
32% |
28% |
Why do you think the remit and responsibilities of your role have increased within the last five years?
|
Reason for claim |
UK |
France |
Spain |
Italy |
Germany |
|
Greater levels of business to service |
54% |
65% |
68% |
45% |
68% |
|
Technology and an ‘always-on’ culture |
43% |
47% |
40% |
49% |
29% |
|
Regulatory change (e.g. preparing for GDPR) |
37% |
33% |
30% |
33% |
22% |
In which area(s) are you most concerned about experiencing a business issue?
|
Reason for claim |
UK |
France |
Spain |
Italy |
Germany |
|
Cyber-attack/data breach |
30% |
38% |
35% |
33% |
30% |
|
Compliance with GDPR & data privacy specifically |
23% |
18% |
21% |
15% |
20% |
|
Competition & profitability |
21% |
25% |
30% |
26% |
20% |
|
Increasing regulation and governmental controls |
16% |
19% |
14% |
19% |
22% |
|
Financial turmoil |
15% |
20% |
16% |
13% |
14% |
<ends>
For further information contact:
Alexis Burris, Media Relations Adviser, QBE, +44 (0)20 3465 3921
Sandra Villanueva, Senior Media Relations Manager, QBE +44(0)20 7105 5284
About QBE
QBE European Operations is part of QBE Insurance Group, one of the world’s leading international insurers and reinsurers and Standard & Poor’s A+ rated. Listed on the Australian Securities Exchange, QBE’s gross written premium for the year ended 31 December 2017, was US$14.1 billion.
As a business insurance specialist, QBE European Operations offers a range of insurance products from the standard suite of property, casualty and motor to the specialist financial lines, marine and energy. All are tailored to the individual needs of our small, medium and large client base.
We understand the crucial role that effective risk management plays in all organisations and work hard to understand our clients’ businesses so that we offer insurance solutions that meet their needs – from complex programmes to simpler e-trading solutions – and support them in minimising their risk exposures. Our expert risk management and rehabilitation practitioners focus on helping clients improve their risk management so that they may benefit from a reduction in claims frequency and costs.