Back in 1994, after 20 years in power engineering, I went self-employed.
There was a choice – I could have followed my company to the South West of England as my employers wanted but I reasoned that my family would suffer and I didn’t fancy spending every week away from home with a 150 mile commute each way on the M5 and M6. Those who live in the UK will know the nose-to-tail grind on our motorways.
Nor did I want to move because I reckoned it takes some years to build true friendship circles and we had only just bought our house. There was a handsome severance offer that I didn’t expect would be repeated plus I estimated a mean time between re-organisation of 18 months, such has been the outbreak of managerialism in the UK.
The internet and open source software arrived exactly on time so I was able to work at home almost as well as in a well-equipped office. So it really was a no-brainer.
With a physics background, my field is statistics. Most of the work I had done within the company was on materials, reactors, boilers, turbines etc. So I was well placed to carry on consulting, which is indeed what happened. In nuclear issues, statistics is essential for many calculations to be able to answer questions like what’s the chance of a boiler tube failure. These can have both economic and safety implications and you can’t just nip into the reactor to look.
We have a pretty independent-minded regulator in the UK so you have to get it right. My work, though very technical, was always subject to verification, validation and some sort of review. Many engineers and scientists – at least in the physical sciences –have very little understanding of statistics past a stats 101 level even in grad school, maybe because most advanced statistical methods originate in softer areas such as life or social sciences.
So I wasn’t worried about being challenged – I was confident that the methodologies I suggested were sound and defensible. If on occasion an inferior approach was ‘required’ because ‘that’s the way the calculation had always been done’, I was careful to suggest better methodology in the report discussion.
However I had a nagging worry. What if I was challenged? I could appeal to academic colleagues to defend my approach but that would take time. What about looking for new pastures where I wasn’t known? What if a client found some trivial excuse to delay payment or worse? How would I defend myself?
It was during this time that I decided to take out professional indemnity insurance. This covered me against claims and gave me the security of knowing that I could defend myself against malicious litigation.
What is professional indemnity insurance? According to Wikipedia it fills the gap for the self employed between liability, employers’, public and product insurances. It provides cover for the client where the consultant is a ‘one man band’ or otherwise tiny and provides cover for the policy holder against awkward clients. So it’s a win-win situation. While my area may be very unusual and specialist (far too high level for general industry as I subsequently found), there are many people who are self-employed who may need it.
Architects, doctors, lawyers, accountants or similar profession are already required to have cover by their professional body – a surgeon friend who does private work outside the National Health Service pays a fortune. But consider builders, plumbers, anyone in the construction industry; beauticians, therapists, hairdressers, anyone in the lifestyle industry; software authors, computing services, anyone in the IT industry. All these could suffer from claims of negligence, breach of duty, errors, omissions and so on.
While making a mistake is always possible, there may be those awkward clients who just don’t want to pay. Some policies provide cover for events even after you have retired or moved on to other things so be check the terms but a suitably written PI policy can provide you with the peace of mind and protection against a claim that, hopefully, you will never have to call on – but if it happens, you will not be on your own.
Personal indemnity insurance is to the self-employed what house insurance is to the home owner. Get it.