What insurances does a recruitment agency need?

Running a recruitment agency means more than filling vacancies - it’s about managing risk, meeting legal obligations, and building client trust. With multiple liabilities and fast-changing regulations, having the right insurance in place is essential.

This guide explains the core insurances a recruitment agency may wish to consider, how your business model affects cover, and what clients expect from your policy documents.

Essential insurances for recruitment agencies

Recruitment businesses typically need a mix of legal, contractual and practical cover types to operate safely:

Professional indemnity insurance (PII)

PII protects your agency against claims of professional negligence, such as:

• Recommending a candidate who misadvises the suitability of a candidate or misrepresents qualifications
• Failing to carry out sufficient background checks
• Sharing confidential information without consent

These claims can lead to costly disputes and reputational damage. PII helps cover legal defence costs and any compensation that may be owed.

If you’re unsure whether PII is a legal requirement or simply best practice, this guide explains why it’s essential for recruitment agencies.

The Kingsbridge Recruitment Insurance policy also considers vicarious liability where you either knowingly or unknowingly accepting responsibility and liability for the actions of a temporary worker and/or contractor. This could be via a hold harmless agreement present in the end clients’ terms of business/contract, and present contractual liability. We include this as standard under the public liability and can extend to include full vicarious liability to protect you against the negligent actions of temporary workers/contractors.

Employers’ liability insurance (EL)

This is a legal requirement in the UK if you employ anyone - including PAYE temps or staff under your control. EL covers compensation claims if someone working for your agency suffers illness or injury in the course of their work.

This might include:

• Legal defence extraction and redirection should you be legally pursued for the injury of a temporary worker whilst on assignment (if under the supervision, direction and control of you, this would extend to compensation).
• A staff member developing stress-related illness from work pressure

You can explore more about how EL applies in recruitment in our dedicated employers’ liability article.

Public liability insurance (PL)

PL protects your business if a third-party individual is injured or their property is damaged because of your activities, for example:

• A client is injured during a visit to your office
• A temporary worker damages equipment while working on a client site. PL extends to cover your legal defence in redirecting the circumstances away from you to the responsible party, and/or cover your liability if you have accepted contractual liability for the worker’s actions.

Many clients expect PL as standard in your insurance documentation, even though it’s not legally required.

Cyber liability insurance

Recruiters handle high volumes of sensitive personal data, making them prime targets for cyber threats. Cyber insurance can help if:

• A phishing attack exposes candidate or client data
• Ransomware locks your CRM system
• A GDPR breach leads to fines or investigations

Our cyber liability insurance for recruitment agencies can include breach response support and GDPR-aligned cover to protect your operations and reputation.

Drivers’ negligence cover

If you place delivery drivers, HGV operators or transport staff, this optional cover and are agreeing contractually to pick up the negligent damage to the client’s vehicle, then this is a consideration. It protects against the cost of damage to client vehicles caused by the negligence of individuals you’ve supplied. For example, a temp driver drives a large HGV lorry under a low bridge, the damage to the HGV would be coverable under the drivers’ negligence cover.

Legal expenses and IR35 support

This optional cover helps with the cost of employment disputes, contractual issues, and certain types of regulatory investigations.

While we do not provide IR35 insurance for recruitment agencies, it may be useful for your team to stay informed about off-payroll working rules if you're involved in contractor placements. However, our cover focuses solely on protecting your business - not the workers you supply.

Is it a legal requirement?

Only Employers’ Liability insurance is mandatory under UK law. However, most recruitment agencies also carry:

• Professional Indemnity, to meet client contract terms
• Cyber and PL insurance, to reduce operational risk
• Drivers’ negligence, if placing workers in transport roles

Without the right cover, you may face:

• Contract rejection or supplier removal
• Increased financial risk from claims or legal action
• Difficulty obtaining future insurance if a claim arises

Permanent vs temporary placements

Different placement models affect your risk exposure:

• Permanent hires: Claims typically relate to professional advice — such as CV misrepresentation, or misadvising suitability of a candidate.
• Temporary or contract placements: Will provide legal defence to redirect circumstances away from you where you are legally pursued for the actions of temporary or contract placements whilst on assignment. If they are genuinely under your control, and/or you have agreed contractually to be held liable for these actions, then the cover would respond.

If you use an umbrella company, does this change your insurance needs?

No. Everything above still applies; equally, the umbrella company will need to own their own insurance policy to cover their business needs and exposures. Our bespoke policies can provide dedicated umbrella company insurance.

What clients expect from your insurance documents

Before onboarding or issuing work, clients may ask for:

• Evidence of PII cover
• Employers’ Liability certificate confirming legal compliance

If you’re not sure what to include, this guide outlines exactly what clients expect from your insurance.

Choosing the right business insurance package for your recruitment agency

A combined recruitment policy reduces admin, prevents gaps in cover, and ensures your niche needs and exposures are protected.

When comparing providers, ask:

• Does the policy include all relevant covers: PII, EL, PL, cyber, legal expenses?
• Is it designed specifically for recruitment agencies, including temps and contractors?
• Can cover be adjusted as your agency grows?
• Do the documents meet client onboarding requirements?

Kingsbridge Recruitment Insurance was built with recruiters in mind - offering flexible protection, deep industry expertise, and tools that support contract success.

Get the protection your recruitment agency really needs

The right insurance doesn’t just keep you compliant - it protects your people, your placements, and your ability to win work.

Whether you’re a startup handling perm hires or a multi-sector agency placing temps, Kingsbridge Recruitment Insurance offers FCA-compliant cover and expert support tailored to your industry.

Need help building or reviewing your policy? Our team is ready to guide you.