Not every business is the same and requirements for cover will vary from business to business, therefore CIMA suggests you always talk to a broker about finding cover that is specific to your business and suitable for your needs.
What is Professional Indemnity Insurance?
If you are alleged to have provided inadequate advice or services to a client, Professional Indemnity Insurance can help protect your business. It can offer cover if you need to pay compensation to your client to correct a mistake and can also provide cover for the legal costs and expenses in defending the claim.
Regardless of your level of experience, there is always the possibility you (or one of your team) could make a mistake. Professional indemnity insurance can give you cover in a wide range of scenarios, including:
- Professional negligence (i.e. making a mistake in a piece of work for a client)
- Loss of documents or data
- Unintentional breach of copyright and/or confidentiality
- Defamation and libel
- Loss of goods or money (your own or for which you are responsible)
What limit of professional indemnity do I need?
CIMA does not advise on the level of cover you are likely to need as this must be assessed according to your own circumstances. In considering what level of cover is suitable for you, you may wish to:
- Speak to a broker: a qualified broker can advise you, based on the information you provide about your business and risks associated with the business and your clients.
- Be specific about your needs: assess your business risks, client profile and even the location of your business e.g. do you rent an office or work from home?
- Check other sources of information: for example, the FCA provides a useful factsheet on PII for anyone working in a regulated industry:
- Seek guidance from others, including other members in practice
- Think carefully about any particular risks associated with your client base or practice
- Be aware of legislative and/or regulatory requirement on you: e.g. do you advise on a particular area such as tax or company formation?
- Revisit your requirements in the light of client profile, risk, size of business and so on during the course of the year to ensure your cover continues to be sufficient.
Some insurers may offer cover for disciplinary proceedings by a professional body and this is something you should consider when reviewing your business risks and potential costs. As with all risk, you and your broker must discuss the probability of an event and the cost of cover. Bear in mind, however, that although the risks of disciplinary proceedings are low, the impact may be high in terms of costs and time.
The duty of fair presentation
Under the Insurance Act 2015 you have a duty to make a ‘fair presentation’ of the risks to your business. Failure to disclose all the facts around your insurance requirements could adversely affect the validity of your insurance policy. Members are advised to seek the advice of their broker around the requirements.
- Take expert advice from a PII provider as to how much cover is available and at what costs
- Seek to quantify personal exposure/the practice’s exposure to risk
- Consider whether in the unlikely event of a client making a complaint to CIMA legal costs arising from your defence of the complaint would be included in the cover
- Assess whether the anticipated protection is sufficient to meet potential claims and is consistent with that of similar firms (your insurance broker will be able to assist with this)
- Consider to what extent if any claims can be met from the practice’s resources
- Consider carefully the need for run off cover – cover which operates for a defined period after the practitioner has ceased to practice (e.g. on retirement).
CIMA have produced a useful guide PDF (52 KB) showing how requirements differ for different business types.
The more information you can provide a broker, the more suitable your cover will be. Please note, members in practice are free to choose an insurance provider of their choice.
If you have difficulty obtaining cover or need further advice please contact CIMA Professional Standards team.
MiPs in the Republic of Ireland who are acting as liquidators
IAASA have recently made Regulations setting Professional Indemnity cover requirements for liquidators.
The Statutory Instrument, which comes into effect on 1 June 2016, can be accessed here:
Statutory Instrument 127 of 2016 Companies Act 2014 (Professional Indemnity Insurance)(Liquidators) Regulations 2016
Please also note that sections 633 and 634 of the 2014 Act now provide a statutory regime governing qualifications for appointment as a liquidator or provisional liquidator.
In order to qualify for appointment as a liquidator of a company, CIMA members must:
- hold a current practising certificate;
- and comply with the PII requirements set out in the Companies Act 2014 (Professional Indemnity Insurance) (Liquidators) Regulations 2016 which sets a minimum PII threshold cover of E1,500,000.
Keeping PII details up to date with CIMA
It is essential that PII records are kept up to date with CIMA. Upon renewal of the policy please update the details online through your MY CIMA account.
As part of CIMA's ongoing quality assurance processes, CIMA conducts checks to ensure that members' PII details are current.