As businesses continue to adapt and scale, offshoring and virtual assistants (VAs) have become increasingly common. They offer flexibility,
cost savings, and access to a global talent pool. However, as with any business decision, it is important to consider how these arrangements
may impact your insurance.
Many businesses are surprised to learn that employing offshore teams or VAs can have insurance implications. Whether you are working with a contractor in the Philippines or a VA based in South Africa, it is worth understanding the risks and how insurers may view these arrangements.
Key Insurance Considerations
Professional Indemnity Insurance
If your offshore team or VA is providing advice, consultancy, or other professional services to your clients, it could create exposure under your Professional Indemnity (PI) policy. Insurers are increasingly asking businesses whether any part of their service delivery is outsourced offshore. Why? Because it can complicate liability if something goes wrong.
Some PI policies have exclusions or conditions around outsourcing and subcontracting, particularly if it is offshore. You may need to declare this upfront when arranging cover. If not disclosed properly, it could impact the validity of the policy at claim time.
It becomes more complex if your business sets up a foreign-registered subsidiary or associate company to engage offshore staff. Depending on the jurisdiction, local insurance policies might be required to comply with regulatory requirements. For example, Malaysia mandates the use of local policies. Similarly, if you engage offshore contractors through a locally registered foreign entity rather than directly, insurers may have limited rights to recover losses from that overseas entity. In some cases, claims might even be excluded.
Many SME businesses using offshoring or VAs often find that standard PI policies available in the market are not capable of being amended to accommodate this risk. Disclosing the use of offshore staff is essential, but it is only the first step. To ensure proper protection, businesses need to work closely with their broker to amend policy terms and conditions or set up additional local policies where needed. This process can be complex and time-consuming, and even among corporate insurers, setting up the right cover is not straightforward.
Cyber Insurance
Many virtual assistants and offshore teams access your systems, files, and client data remotely. This increases your cyber exposure. Consider this: multiple access points from different geographies can significantly raise the risk of a cyber breach.
Insurers often ask about your IT security protocols, including how you manage access for offshore staff. They may also require evidence of multi-factor authentication (MFA), VPNs, endpoint security, and other cybersecurity measures. Weaknesses here could not only impact your risk profile but also influence the cost and availability of cyber insurance.
Given the reliance on remote access, businesses should make cybersecurity a priority, ensuring offshore staff adhere to the same standards as local employees.
Workers’ Compensation and Injury Cover
In Australia, workers’ compensation typically only covers employees based locally. Offshore contractors and VAs are generally not classified as employees under Australian law. However, depending on how your engagement is structured, you still need to be aware of potential employer liability exposures.
While directors and officers (D&O) exposure for employment-related claims may be low in this context, businesses must ensure they understand any statutory Employer’s Liability requirements, both in Australia and in the countries where offshore workers are based. In some jurisdictions, statutory employer liability cover is mandatory even for remote workers, and failing to have the correct cover could leave the business exposed.
Public Liability Insurance
Generally, offshore staff are not physically interacting with your clients or operating on your premises, so the direct impact on your Public Liability policy is minimal. However, if their work leads to client dissatisfaction, financial loss, or reputational damage, it could still spark claims that indirectly affect your broader business insurance program.
Best Practices to Manage Risk
The Bottom Line
