What is Professional Indemnity Insurance? 

Professional indemnity insurance, or PII, is an insurance product which covers a wide range of scenarios where someone may rely on advice which you give or services you provide. If the third party suffers a financial loss as a result of your negligence, they could try to sue you for their expenses. 

For example, an auctioneer has a duty to ensure that lots in their catalogue are described accurately. This has become especially relevant as a higher proportion of sales have moved online, and many buyers may not view the item in person. Auctioneers also have a duty to their vendors, to ensure that items are correctly identified and that they realise their correct market value. 

The same principles apply to other industries. Property professionals, such as surveyors, have a significant exposure, as their customers must rely on their expertise and advice when purchasing property or making alterations. The Royal Institution of Chartered Surveyors (RICS) sets out minimum requirements for their members. RICS members must ensure that they purchase the correct cover to satisfy the organisation. 

What does Professional Indemnity Insurance cover? 

While most insurance covers incidents on the date they occurred, professional indemnity insurance (PII) covers claims made during the period of insurance. This is because a mistake can take some time to come to light. This is why it is important to continue to maintain cover even after your business ceases trading, as you could still be sued for events which have happened in the past. 

When you purchase cover, you can choose to have fully retroactive cover. As long as you declare any circumstances which you know of which could give rise to a claim, and the underwriter agrees to cover these, any mistakes which you may have made in the past will be covered. 

When considering how much cover you need (the sum insured), you need to understand your exposure. Essentially, how much could a customer try to sue you for as a result of an error which results in expenses for them. 

Who needs Professional Indemnity Insurance? 

Regulators require certain industries to hold PII, depending on their specific requirements. Examples include: 

• Accountants. 
• Surveyors. 
• Mortgage brokers. 
• Financial consultants. 
• Engineers. 
• Insurance brokers / agents. 
• Solicitors. 
• Tax professionals. 

When working for a business which is required to hold PII, the business will purchase the cover, rather than the individuals working for the organisation. Normally, the policy will include a clause which covers the individuals for their personal liability. This exists as a result of their work, ensuring that vicarious liability is considered. 

The individual regulator will usually set out their requirements for the cover. They will include minimum sums insured, maximum excess levels, and scope of cover. 

Even if you’re not required to hold PII cover, it’s something which is well worth considering. Do you have enough liquidity to defend a claim against you? If one of your customers is successful in court, they could obtain a judgment against you. This could bankrupt the business. 

How much is Professional Indemnity Insurance? 

Really, it depends on which industry you’re working in. Other factors which affect the premium include: 

• The sum insured. 
• Your track record (an established business with a clean claims history is a more attractive prospect for underwriters). 
• The excess (how much of the risk you’re retaining, each claim). 
• Your risk management: 
  • Whether work is checked before being signed off. 
  • Whether you have standard terms of service. 
  • Experience and qualifications of the people producing/checking work. 

Can you easily get coverage? 

Again, this will depend largely on your industry. Some insurers will happily provide cover on the basis of a statement of fact for lower-risk trades. You can obtain this cover online for a very competitive premium. 

Other businesses, such as solicitors, accountants, property professionals, financial advisors, mortgage brokers and auctioneers may require attention from an underwriter via a full proposal. Appointing an insurance broker, authorised by the Financial Conduct Authority, is appropriate in these circumstances. This is because they can explain the merits of each policy and make a personalised recommendation. While cost will be a significant deciding factor, insurer selection is essential to make sure the right cover is in place. 

Does Public Liability Insurance cover bad advice? 

Public liability insurance, or PL, only covers claims made against you for bodily injury or property damage resulting from an unforeseen event. It will specifically exclude financial losses suffered by others. 

Who can provide Professional Indemnity Insurance? 

You should choose an insurer which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Doing so ensures that you have a reasonable level of protection from insurer insolvency which would invalidate your cover. Always consider the insurer’s financial rating and their reputation for paying claims. 

Appointing an insurance broker to select an insurer gives you further protection, as brokers understand the market and can provide advice on which insurer you should choose. Your insurance broker must be authorised and regulated by the Financial Conduct Authority. 

Always remember that an insurance contract only demonstrates its value at the time of a claim. Purchasing a cheaper policy, or one which is invalid, which doesn’t pay can cost you more in the long run. 

Where can I get a Professional Indemnity quote?

Anthony Wakefield & Company would be a good place to start. The Royal Institution of Chartered Surveyors (RICS) lists us on its website as brokers with experience of providing services for RICS regulated firms. Contact Anthony Wakefield & Company online to get your Professional Indemnity quote or call us on 01306 740 555 and speak with Cyrus Wakefield or Robyn Homewood.