PI Expert is often asked by clients for advice on the level of Professional Indemnity Insurance (PII) cover that they should buy. This is a common question that all insurance brokers encounter in their work in respect of many different types of cover, but what is specifically interesting in connection with Professional Indemnity Insurance is that a number of professions never or rarely ask this question. Typically these are professionals who have an industry body that lays down a minimum requirement for cover. This will include Solicitors, Accountants, Surveyors and Insurance brokers, IFA's and Mortgage Advisors.
Maybe some of these worthy individuals will have thought long and hard about the limits of cover that they are buying and have concluded that the minimum cover required by their regulatory body is the right level of cover for their firm, however as these professionals rarely buy more than the prescribed minimums it is doubtful that any real meaningful thought goes into this. In a "no win no fee" culture PI Expert believes that this is a dangerous attitude to adopt.
Insurance Brokers are a really good example of a class of PI buyers who really should know better – after all we spend our lives advising others to think about the risks that the business faces, we spend time helping clients predict the financial impact of a major fire or similar disaster on their business and help formulate Business Interruption cover requirements. But when it comes to our own cover we buy the minimum that the FSA says we should have. This really is a case of "physician heal thyself"! You only have to look at the number of Brokers who did not buy cover for PI risks prior to being forced to by the FSA to realise what little importance we as a profession attach to a vital cover for our businesses.
The FSA lay down a minimum requirement for Professional Indemnity Insurance for General brokers which at the time of writing is €1,120,200 for a single claim and €1,680,300 in aggregate. If we were to take a fairly typical property portfolio for a reasonable sized client it is easy to see that an incorrectly insured office building destroyed by fire could wipe out the minimum FSA PII sum insured and then some! Or a business interruption claim for ongoing profits – if these are forecast incorrectly (which is not unusual particularly in the case of a factory which has an ongoing loss of profits claim due to it taking longer to regain orders after the rebuild than the rebuild takes itself) you could be looking at a poor advice claim of many millions of pounds. And this would probably be enough to take most small to medium sized brokers out of business as well as their clients.
The same can be said of Lawyers – particularly those practising in the conveyancing field – or indeed surveyors. Accountants too – the minimum PI requirement laid down by ICAEW is two and a half times fee income. But what would be the impact of messing up a big clients VAT or tax advice? Could it wipe out your PI Limit? And if so, remember that sole trader and partnerships (solicitors and accountants particularly take note) the individual not the firm, bears the ultimate cost – even to the loss of their own assets or the shirt off your back to quote a famous maxim.
PI Expert offer specialist help and advice to all types of professions for their Professional Indemnity Insurance (PII) cover. Call 01825 745 410 for a quotation.
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