Why you need directors & officers’ insurance right now

While taking on the official mantle of a director or officer for a business carries kudos and potentially a good slice of profits, such a title also carries the burden of responsibility – which is why specific directors & officers’ insurance, together with management liability cover, should be a priority policy for every business.

What is directors & officers’ insurance?

Before we talk about just why it’s so important, particularly in this current climate, let’s sum up the definition. Directors & officers’ insurance protects those that carry that title from personal losses if they’re being sued or facing a claim against them. And this includes the cost of legal and defence fees – as well as both criminal and regulatory investigation costs – if this situation were to occur. Cases are often commonly referred to as “wrongful acts”, with the blame being pointed at directors and/or officers. 

Who needs directors & officers’ insurance, and why

Although we call this D&O insurance, this cover should extend to senior managers and partners as well. In any growing business, the risk of needing to utilise this policy is ongoing. There may be a site accident, or an accusation of a harassment incident, covering everything from defamatory language to unfair dismissal and all forms of perceived discrimination in between.

This cover won’t halt or cancel out the investigation or case, but it will protect those in the business from financial and reputational damage or even ruin. And while ‘ruin’ may sound like too strong a word, there can be no coming back from having a poor defence in the event of a challenge.

Read more here at Investopia.

The current threats causing a rise in D&O claims and judgements

Every business generation faces its own unique issues and threats. Sexual and gender discrimination and harassment cases in the workplace have been steadily building over the last three decades, and those who are differently abled continue to challenge both bias and the physical setup of work environments that are not fully designed to accommodate their needs. All of these may typically find their way into a D&O claim or case if it’s seen that liability and responsibility lies with those personally at the very top, rather than the business.

However, the latest threat that directors and officers need to be alerted to, is from AI (artificial intelligence).
 

The relationship between AI and the Boardroom

As AI continues to infiltrate every aspect of our lives, we all need to be aware of the risks and invisible boundaries for this limitless technology. Right now, AI is being more widely used in the Boardroom, with a range of well-known businesses incorporating new positions focused solely on this, such as the Chief AI Officer. AI and those in these types of roles are helping to take directors towards solutions and data that often have massive impacts on employees and business models. On the face of it, this seems to be a huge leap forward. By partly removing the onus of decisions from the hands and biased minds of humans, the results will surely be more impartial.

But the lingering question is, who is responsible and liable (the key word when it comes to D&O insurance) for any negative outcomes that may result from AI intuition and subsequent decision-making?  And if, down the line, this turns out to present poor outcomes for those at the sharp end, who would be to blame – the software designers/providers, the wider business, or the directors themselves? In short, the one “entity” that cannot be blamed or sued is the actual AI software. 

On a more granular level, as AI and chatbots start to perform the jobs of real people, where exactly does this leave human employees who are finding themselves replaced? The BBC recently commented on this using a Goldman Sachs report as its source, stating that AI has the potential to replace up to 300 million full-time jobs worldwide, which almost certainly would simultaneously see a rise in those wanting to sue, blame, and claim.

Whether the above sounds worrying familiar to you, or is new and essential information, you can address all director and officer concerns, as well as get a quote for D&O insurance, by calling our specialist team on 0330 008 1334 today.