With the highly regulated environment that companies operate in today, there is a growing need to protect directors, officers and senior management from an ever widening range of exposures.
With the highly regulated environment that organisations operate in today, there is a growing need to protect directors, officers and senior management from an ever-widening range of exposures. A decision that adversely affects shareholders, employees, customers, or creditors or breaches a regulatory issue can lead to a lawsuit that may leave individuals personally liable. Cover can also be designed to protect the company against shareholder suits, employment practice liability and other such claims.
Understanding the insurance market and driving outcomes for you
Insurers are continuously adapting to shifting market dynamics. A rise in both the frequency and severity of claims is prompting many insurers to reduce their exposure — and in some instances, to withdraw from certain market segments entirely. For organisations considered medium to high risk, this is translating into higher premiums and increased deductibles.
For Australian executives, D&O insurance should not be treated as a simple compliance item. Every organisation has a unique risk profile, and this must be thoughtfully evaluated. Key internal questions to consider include: Will the insurer pay up front or advance the legal costs of defending a claim or official investigation? What exclusions or restrictive extensions might limit my coverage? What information needs to be disclosed or notified to insurers to ensure coverage is maintained? Being proactive and informed in these discussions is essential to securing meaningful protection.
Director and Officers Liability Insurance FAQs
How do we determine the right coverage limits and structure for our D&O policy?
Determining the right coverage involves assessing your company’s risk profile and potential claim amounts. Understanding the differences between Side A (personal), Side B (company), and Side C (entity) coverage is key. Expert guidance can help tailor a policy that balances cost with robust protection.
What impact do class actions have on D&O insurance pricing and availability?
Class actions significantly increase insurers’ risk exposure, leading to higher premiums and stricter terms. This environment makes it challenging to secure affordable D&O insurance. Companies must strengthen risk management practices to negotiate favourable policy terms.
Can 'cheap' D&O policies be expensive?
D&O policies that appear ‘cheap’ in the first instance might be more costly if inadequate cover is provided. Insurance premiums are important but must be considered contextually. The premium is never the focus when a D&O claim or regulatory investigation occurs. Directors and Officers' main concerns are always, "Am I covered?" and "How quickly can the policy respond?".
