FCA authorised · FRN 724952 0117 325 0027Quote & buy →
Marketing and promotions
Yes. A sales promotion agency designs the mechanic, writes the terms and often runs the promotion for the brand, so one mistake can turn a giveaway into an unlawful lottery, a flood of unexpected winners or a wave of complaints. Professional indemnity insurance usually covers your liability when a client says your advice or administration caused its loss. It does not usually pay for the prizes themselves, which is what prize indemnity and over-redemption cover are for.
Part of: Professional indemnity for marketing consultants
In short
Promotions agencies face an unusual mix of risks. Get the mechanic wrong and a paid-entry prize draw can be an unlawful lottery under the Gambling Act 2005. Get the response estimate wrong and the promoter can breach CAP rule 8.10 when stock or prizes run out. Get the administration wrong and winners go unpaid or winning codes go on the wrong packs. CAP rule 8.14 says promoters, agencies and intermediaries should not give consumers justifiable grounds for complaint. PI covers your liability for negligent mechanics, terms and administration, subject to the policy terms; fines and the cost of the prizes themselves are a different matter.
Last reviewed 5 October 2026 by the Apex professional indemnity team.
Public liability covers physical accidents, such as a member of the public injured at a sampling stand or roadshow. It does not respond when the problem is the promotion itself: a mechanic that breaks the law, terms that mislead, a forecast that was wildly wrong or a draw that was never properly supervised.
Those failures cost the brand money. It may have to stop a promotion mid-flight, refund entrants, honour far more redemptions than it budgeted for, reprint packaging or answer the ASA. When it looks for someone to pay, it looks at the agency that designed or ran the promotion. Professional indemnity (PI) insurance usually responds to that claim: your legal liability for the financial loss your professional work caused, and the cost of defending the allegation.
Under the CAP Code the brand, as promoter, is responsible for all aspects and stages of its promotion (rule 8.1). That does not protect you. Your contract will usually make you responsible for the mechanic, the terms, the supervision of draws or the fulfilment you agreed to provide, and rule 8.14 names agencies and intermediaries directly.
These examples are illustrative, not real claims, but each shows how a promotion can go wrong and land on the agency.
None of these is an accident in the public liability sense. Each is an allegation that a competent promotions agency would have designed, checked or run things differently.
Section 8 of the CAP Code covers promotional marketing: consumer and trade promotions, incentive schemes and the promotional parts of sponsorships. These rules come up most often in disputes.
| Rule | What it requires | Where agencies get caught |
|---|---|---|
| 8.2 | Promotions must be run equitably, promptly and efficiently, and promoters must avoid causing unnecessary disappointment. | Slow fulfilment, broken entry systems and confusing mechanics. |
| 8.9 and 8.10 | “Subject to availability” does not remove the duty to avoid disappointing participants. Promoters must be able to show a reasonable estimate of likely response, and either that they could meet it or that consumers had clear information on limits and likely demand. | Redemption forecasts and stock or prize allocations. |
| 8.14 | Promotions must be properly supervised and adequately resourced. Promoters, agencies and intermediaries should not give consumers justifiable grounds for complaint. | Handling houses, helplines and claims processing. |
| 8.15.1 | Prizes must be awarded as described, or reasonable equivalents, normally within 30 days. | Late or substituted prizes. |
| 8.17 and 8.28 | Significant conditions must be communicated, and prize promotions must state specified information clearly before or at the time of entry. | Terms written by the agency and truncated in the creative. |
| 8.24 and 8.26 | Prize draws must be decided by chance, using a verifiably random computer process or an independent person. Competitions judged subjectively need an independent judge. | Draws run in-house without independent supervision. |
The data side matters too. The ICO’s guidance gives the example of a business card dropped into a prize draw box: it shows agreement to be entered in the draw, but that consent does not extend to marketing, which needs a separate lawful basis.
| Usually covered by PI | Often excluded or limited | Needs a different policy |
|---|---|---|
| Client claims that a negligent mechanic, forecast or set of terms caused its loss | The value of extra prizes or redemptions, which a wording may treat as the client’s own promotional cost | Paying out when more people win or redeem than expected (prize indemnity or over-redemption insurance) |
| Errors in administration, such as winner selection, code seeding instructions or fulfilment | Fines and penalties, including any imposed after a prosecution or by the ICO | Injury at sampling events and roadshows (public liability) |
| Advice that a promotion was lawful when it was not, where negligence is alleged | Running a mechanic you knew was unlawful | Faulty premium items or free gifts that injure someone (product liability) |
| Breach of confidence, such as leaking a launch promotion early | Promises of a guaranteed response or redemption rate | A breach of the entrant database you hold (cyber) |
| Defence costs, including legal and expert fees | Claims you knew about before the policy started | Theft of vouchers, prize funds or stock by an employee (crime or fidelity cover) |
Everything here is subject to the policy terms and the insurer’s acceptance. If you run handling, fulfilment or prize draws as well as designing promotions, make sure the policy describes those services, not just “marketing consultancy”.
This is the question that sits behind the most serious promotions claims. Under section 14 of the Gambling Act 2005, an arrangement is a simple lottery if people have to pay to take part, prizes are allocated, and the allocation relies wholly on chance. The Gambling Commission says lotteries cannot be run for commercial or private gain, so a brand promotion that meets that definition is a problem. Promoting an unlawful lottery is an offence under section 258, although it is a defence to show a reasonable belief that the arrangement was not a lottery. These rules apply in Great Britain; Northern Ireland has its own legislation.
“Paying” is wide. Under Schedule 2 it includes paying for goods or services at a price that reflects the chance to enter, and paying to find out whether you have won or to claim a prize. A letter by ordinary post or a call at a normal rate is not payment. The Commission’s guidance says a draw tied to a product bought at its usual price, such as a chocolate bar, is not treated as requiring payment, but a price that bears little relation to cost or to comparable products may be challenged.
Where people pay specifically to enter, the draw stays outside the definition only with a free entry route: every eligible person can choose to enter by ordinary post or another method neither more expensive nor less convenient than paying, the choice is publicised so entrants are likely to see it, and the prize system treats free and paid entries the same. The Commission adds that the free route must be promoted and displayed at the same level as the paid route.
A competition escapes only if the skill, judgement or knowledge required can reasonably be expected to stop a significant proportion of people from entering or from winning. The Commission says multiple-choice questions, or questions that give a second chance after a wrong answer, rarely meet this test, and nor do questions whose answers are easy to find online, widely known or given in the accompanying text.
The Commission does not approve free draws or prize competitions, and CAP advises promoters to take legal advice on prize promotion mechanics. If you design mechanics, keep a record of the structure you recommended, the reasons for it and any legal advice the client obtained. If a promotion is challenged, that file is what shows whether your advice met the standard of a competent agency.
No regulator sets a PI limit for promotions agencies; the figure normally comes from the client agreement or a procurement framework. Size it on the largest promotion you work on, taking in the prize fund, the product and packaging involved and the media behind it, not just your fee.
Check two details in the contract. First, whether the client wants the limit to apply to each claim or in total for the year: an aggregate policy may not satisfy an each-and-every-claim requirement. Second, whether you have agreed to indemnify the client for any regulatory consequences, which may go beyond what PI will meet.
PI is claims-made, so it pays claims first made during the policy period. Promotions are short, but disputes about them are not: a challenge to a mechanic, a fulfilment backlog or a regulator’s enquiry can arrive months after the closing date. Keep cover continuous, and if the agency is sold or closes, arrange run-off. See run-off cover explained.
A complete proposal gets better terms than a bare one, and a broker can only present what you tell us. Have these ready:
Speak to a broker
PI for sales promotion agencies, placed by a named broker
Start the online proposal and save it as you go, or leave your number and a named broker will call you back, usually the same working day.
Apex Insurance Brokers is an independent insurance broker based in Bristol, established in 2009 and authorised and regulated by the Financial Conduct Authority. We are not tied to one insurer: we work with over 30 markets, including Lloyd’s syndicates through wholesale brokers, and every client has a named broker who handles the placement, mid-term changes, certificates for clients and the renewal.
Yes. Brands rely on you to design lawful mechanics, write clear terms and run promotions properly. If a promotion has to be stopped, over-redeems because of a negligent forecast or pays out to the wrong people, the client will claim its loss from you. PI covers that liability and your defence costs, subject to the policy terms.
No. No law requires a promotions agency to hold PI, and you do not need a Gambling Commission licence to run a free draw or prize competition that meets the Gambling Act 2005. In practice brand owners and procurement teams usually require PI in the agency agreement, often with a minimum limit.
Usually not. The cost of honouring extra redemptions or prizes is normally a matter for prize indemnity or over-redemption insurance, arranged before the promotion launches. If the client says the over-redemption was caused by your negligent forecast or a seeding error, PI may respond to that allegation, subject to the policy terms.
Yes, if the purchase is of a product at its usual price: the Gambling Commission’s guidance says draws tied to normal product purchases are not treated as requiring payment to enter. If people pay specifically to enter or pay an inflated price, the draw needs a free entry route that meets Schedule 2 to the Gambling Act 2005, or it may be an unlawful lottery. Charging people to find out whether they have won also counts as paying to enter.
Not automatically. The ICO’s guidance says entering a prize draw shows agreement to be processed for the draw, not for marketing, which needs a separate lawful basis. Consent should not be bundled into the entry terms unless it is necessary for the promotion. Build the data capture so the marketing choice is separate and recorded.
PI does not pay fines or penalties. Some policies pay legal costs of responding to a regulator or defending proceedings, and others exclude them, so check the wording. Where a client is investigated and then claims that your negligent advice on the mechanic caused its loss, PI is designed to respond to that claim, subject to the terms.
Apex arranges professional indemnity insurance for sales promotion agencies across the UK. Tell us about your work and we’ll find cover that fits. Or call 0117 325 0027.
Start your PI proposal Call 0117 325 0027Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information, not advice on your individual circumstances. Cover is always subject to the insurer’s acceptance and the policy terms, and this page does not guarantee that cover will be available or on what terms.
