This is a common issue. Ultimately, it depends on your business, your clients and your potential liability. Your professional indemnity insurance needs to be able to cover the total rectification costs of your negligence and the legal costs of a claim against you.
Some professional bodies will recommend or stipulate a level of cover hat is required. If your industry is governed by a regulator, check the minimum mandatory insurance requirements to ensure you comply with the limit of indemnity.
For example, chartered and certified accountants are regulated by professional bodies who stipulate that you will need a level of cover at least two and a half times your gross fee income for the last financial year. Sole Traders need a minimum of £50,000 and all other accountants require a minimum of £100,000 cover.
The Architects Registration Board (ARB) recommends at least £250,000 coverage for all its members, and those businesses regulated by the Financial Conduct Authority (FCA) require more than £1 million in cover. You can usually choose between £50,000 and £5 million of professional indemnity insurance.
2. Should I use a broker or go direct to an insurer?
A good broker will give independent professional advice on the best cover available and many insurers can actually only be accessed through a broker. Distribution ofPI insurance is currently dominated by specialist insurance brokers and over 80% of all UK professional indemnity premium is placed through insurance brokers.
3. Make sure you plan your renewal early
You should always ask your broker for a review of your PI Insurance two months prior to your renewal date. This will allow them time to get a thorough view of the current market for your profession and understand your business fully. You should also ask your broker to provide a range of limits, so you can fully consider the cost and risk at different levels before renewing.
4. When should you notify your insurer of a possible claim?
Different insurers will provide different conditions on the timing of notification, which if breached can result in leaving you uninsured.
Insurers will use different wording such as, requiring notification of circumstances ‘likely’ or ‘that may’ give rise to a claim. Be aware that differences in this wording will place emphasis on your obligation to notify. Where ‘that may give rise to’ provides less emphasis.
If a client has made a complaint and you believe it is likely to lead to the client or third party suffering financial loss, then we would strongly recommend that you notify your insurer as soon as possible. Even when you feel a claim is unjustified it does not remove your obligation to notify insurers.
Likewise, if you discover an instance where you have failed to meet the standards required and it could cause financial loss then you should notify your insurer, even if your client is currently unaware.
If your policy coverage is worded ‘in aggregate’ this will mean it is the maximum amount of cover for all claims made within the given period. Whereas the wording ‘any one claim’ will mean you are covered for unlimited claims up to the maximum amount stated per claim.
There is a big difference between the two so take time to read and understand your policy. Ask your broker to explain the terms fully.
6. What you should never do without your insurer’s permission
It’s important to never admit labilityuntil speaking to your insurer. Neither should you settle, offer to settle, or enter claims correspondence without your insurer’s permission.
It is important not to disclose any details of your professional indemnity policy once a complaint is made. Advise that you need to speak to your insurer and await instructions from your them on how to proceed.
7. Disclose information on any previous complaints or claims
It is important to provide your insurer with as much information as possible on any previous complaints and PI claims. To ensure you are covered correctly, they will want to understand if they are a one-off scenario or part of a larger issue that may continue. Make sure you outline any steps that have been taken to ensure prevention of a similar claim.
Any questions? Please don’t hesitate to contact one of our team.
Stuart Belbin – Stuart.firstname.lastname@example.org | Office: 01245 449067