Insurance protects both parties
When independent sales agents represent your business, insurance questions arise for both sides. Who is liable if an agent makes a misleading claim? Who covers the cost if a prospect is injured during a meeting? What happens if an agent's advice leads to a customer's financial loss?
Understanding insurance requirements protects your business and sets clear expectations with your agents.
Types of insurance to consider
Professional indemnity insurance
This covers claims arising from professional advice, errors, or omissions. If an agent provides incorrect information about your product that causes a customer financial loss, professional indemnity insurance can cover the resulting claim.
Whether agents need their own professional indemnity policy depends on the nature of your product and the advice agents give when selling it. For products in financial services, real estate, or healthcare, this is often essential.
Public liability insurance
This covers claims for injury or property damage arising from business activities. If an agent meets a prospect at their premises and someone is injured, public liability insurance covers the claim.
Many agents who operate as sole traders or small businesses should carry their own public liability insurance as standard business practice.
Product liability insurance
If your product can cause physical harm or property damage, product liability insurance is essential. This is typically your responsibility as the product provider rather than the agent's, but confirm coverage extends to situations where the product was sold by third parties.
Cyber and privacy insurance
If agents handle customer data, consider insurance that covers data breaches or privacy violations. This is increasingly relevant as more sales processes involve collecting and storing personal information.
Who should carry the insurance?
As a general guideline, your business should carry product liability, your own professional indemnity, and any insurance required by your industry regulation. Agents should carry their own public liability, their own professional indemnity (if providing advice), and business insurance appropriate to their structure.
Documenting insurance requirements
Include insurance requirements in your agent agreement. Specify which types of insurance agents must carry, minimum coverage amounts, and the requirement to provide certificates of currency.
Verifying coverage
Ask agents for proof of insurance before they start selling. Set calendar reminders to check that coverage is renewed annually. An agent who was insured when they signed up but let their policy lapse creates an uninsured risk.
Industry specific requirements
Some industries have mandatory insurance requirements for anyone involved in sales. Financial services, real estate, and healthcare are common examples. Check the regulations specific to your industry and ensure both you and your agents comply.
This is general information and not insurance advice. Speak with an insurance broker who understands your industry and the commission only sales model for specific guidance.