Some Frequently Asked Questions About Professional Indemnity Insurance – Pi.

Is it compulsory to have professional indemnity insurance – Pi?

Some occupations such as and accountants, architects (RIBA), Engineers, Insurance Brokers (FCA) , Surveyors (RICS) and Solicitors are required to have Pi by their governing bodies. Some registration bodies such as OSHCR insist on it.

Other Institutes and Associations often make it an accepted standard whilst not insisting on it

More often now-a-days it is seen as a basic minimum professional standard it is a client expectation and can impact the way your business is perceived.

Having a Pi policy in place is important for the many reasons:

  • Client expectations – There is a growing trend of businesses only employing the services of a professional who carries adequate Pi cover.
  • Self Protection – Pi protects your business against compensation sought by a client for your alleged failure to carry out a service or for your actual or alleged negligence. More importantly, Pi provides the legal defense costs involved in defending claims.
  • Safeguarding your reputation – No one likes to think that they make mistakes but the reality is that we all do. The fallout from a claim being made against you can also be severely damaging to your reputation. In most cases the sooner a claim is dealt with the better the outcome both financially and to your reputation. Pi means you can respond quickly to any allegations made against you.
  • Tendering – Many of your clients will just insist on you having Pi.

What is Pi insurance?

A special form of insurance that covers you for claims arising out of your written or verbal advice, if that advice is wrong and causes your client a financial loss or someone a physical or mental injury.

Please read this for a better understanding.

Who needs Pi?

Any person who provides advice, designs or offers a service in a professional capacity is regarded as an expert by their client owes a civil liability duty to their client irrespective of if they have charged for their services.

You can only limit your liability to a small degree by using special limitation clauses in your work otherwise they will be in breach of the Unfair Contract Terms Act.

Even if you are not at fault and can successfully defend a claim, there may still be significant legal costs involved which can be crippling to you and your business. Pi covers that.

What do I Need to Consider?

There are many considerations to take into account when purchasing a Pi policy and it is important that you talk to us about what you want.

There are contractual obligations – Many contracts now stipulate that you carry a certain level of professional indemnity insurance and that you do so for a certain period of time after the contract has ended.

Value of your contracts – This should be a consideration when deciding on the limit of indemnity required. Consider the worst case scenario if you were to make a mistake and a claim for financial redress is made against you.

Cost – The cost of the policy is ultimately going to be a deciding factor and weighing up what the business can afford against the cover available will be key.

How much should I buy?

Your Institute or Association may insist on minimum limits of cover – check with us what these are.

What are you able to afford – start-up firms have costs limitations.

Are you working in a claims active occupation sector?

Do you trade as a limited liability company?

Any catches?

Yes – and it is why you need a specialist.

This is the technical bit but fairly straight forward and important we explain it to you.

All Professional indemnity is underwritten on what is termed a Claims Made basis. What this means is – it is when a claim is made against you that the policy responds not when you did the work. So if you did work last year but a claim is made this year then it is this policy which will respond. There must be a live policy in place to respond.

So once you start Pi you must be prepared to carry on.

Some institutes and associations have strict ‘discovery periods’ after you stop work during which you must maintain the insurance so you will need to budget. We have recommendations about posy work cover as well.

What happens about claims?

Go to the Client Info section and see the claims procedures.