OPINION: Professional Indemnity Insurance – what you need to take into account
Professional indemnity (PI) insurance for accountants has become harder to come by. With malpractice cases against the Big Four accounting firms earlier this year, smaller firms have been hit with the challenge of trying to secure the vital cover they need. Here, Kerri-Ann Hockley, head of customer service at PolicyBee, discusses why and what firms can do.
The insurance market for accountants is hardening.
After many years of a soft market where practitioners could get insurance relatively inexpensively and with ease, things are changing and it’s having a big effect on the small to medium firms.
Recent high-profile cases of malpractice within the accountancy profession have made many insurers cautious of providing cover. The investigations by the Financial Reporting Council (FRC) into audits carried out by the Big Four resulted in enormous fines and now insurers have lost their drive for underwriting PII.
The withdrawal of Lloyd’s from the market in late 2018 added to the mix resulting in premiums rising.
Although it has become more of a challenge, it’s not impossible and firms need to plan to ensure they obtain the cover that’s right for them.
Here are some things to consider:
- Choosing a broker or insurer
Brokers are the middleman between you and the insurer. They help to demystify insurance terminology making sure you provide the answers for the necessary questions. They can also fight your corner when you need to claim.
However, all brokers are not equal. Some will have an area that they specialise in and will be better suited to your business needs, others will not. Do your research to make sure you choose the right broker for you as they will be your support during the good and bad times.
If you are part of a professional organisation, check whether they have any preferred insurers or brokers as they may have negotiated a better price.
Still at a loss? Try contacting the British Insurance Brokers’ Association (BIBA) who will be able to help you find a source for insurance.
- Work ahead of time
Try not to leave it too close to your renewal date to start looking into a new policy. By planning ahead, you can make sure you provide the right information to get the cover you need at the right price. Short timelines can end up in poor buying decisions and ultimately a lack of vital cover when you may need it.
This is where brokers can help. They will start the process earlier so that there’s no break in cover leaving you exposed to risk.
- Provide accurate and honest information
This may seem like a no-brainer but you’d be surprised at how many people get this wrong. False or incorrect information can invalidate your insurance and the insurer could refuse to pay a claim. By making sure you provide accurate and comprehensive information, you can rest assured that your policy will be tailored to you and will protect you when you need it the most.
Don’t forget to mention whether you are a member of any professional associations as this can help when securing a policy.
- Any changes?
Finally, make sure to update your insurer or broker when notable changes occur within your business. This means that there’s no break in your policy and you can be safe knowing that it’s providing the cover you need. For example, you start working outside of the UK or if you acquire a new arm to the business. These increase your risk and therefore need to be understood by the insurer as to how this affects your business long term.
For accountants to get PI insurance in this current market, they need to rethink their process. By taking their time, offering up accurate information and keeping their broker or insurer up to date on any changes in their business, they will get the best rates available and the cover they need.
