Most Common Asked questions about Professional Indemnity Insurance

01. WHAT DOES PROFESSIONAL INDEMNITY INSURANCE COVER?

Sometimes called Errors and Omissions insurance, Professional Indemnity Insurance cover provides protection for companies and individuals against claims which arise from the advice that they give to others in the course of their work. Insurance cover could include cover for inadvertent libel or slander, breach of copyright, Fidelity, Loss of documents and cost of representation at tribunals and disciplinary hearings.

02. WHO SHOULD BUY PROFESSIONAL INDEMNITY COVER?

Anyone who gives advice in the course of their work should buy professional Indemnity cover. This ranges from the obvious professions such as Solicitors, Architects, Accountants, Insurance Brokers, Engineers, Estate Agents, Surveyors, Financial Advisors, Mortgage Advisors, Interior Designers, Management Consultants, Advertising Agencies and Marketing Advisors to the less obvious such as Gas Engineers, Tree Surgeons, Employment and recruitment agencies, Trade Unions, Clubs and Associations, Institutes and professional bodies, IT Contractors, Drainage Contractors, Web designers, Plumbers and Electricians. This list is not exhaustive, but is a small sample of the types of trade that should buy professional indemnity cover.

03. ARE LEGAL COSTS COVERED BY A PROFESSIONAL INDEMNITY POLICY?

Legal Defence costs are normally covered by Professional Indemnity policies, subject to the insurers' prior consent. They cover the costs of investigation, defence and settlement of claims. These costs might embrace lawyers for investigation and defence, loss adjusters, experts and court costs. Claimant's legal costs normally form part of the claim against the insured professional.

04. WHAT IS THE DIFFERENCE BETWEEN PROFESSIONAL INDEMNITY COVER AND PUBLIC LIABILITY COVER?

It is not unusual for people to mix up these two covers indeed we are often asked for Professional Liability cover a combination of the two policy types! It is important to understand which cover you need to buy. In most cases the answer will be that both Public Liabil8uty and Professional Indemnity Insurance will be required. Professional Indemnity Insurance provides cover against the advice that you give in the course of your work, Public Liability Insurance provides cover against the things that you do (or do not do) that result in injury to others. So for example a claim that arises because you have provided a report where a crucial figure is mistyped would be covered by a Professional Indemnity where as a Public liability policy would pick up a claim made against you for tripping over and throwing coffee on your customers carpet.

05. ARE COLLATERAL WARRANTIES COVERED BY PROFESSIONAL INDEMNITY INSURANCE?

Professional Indemnity Insurers generally take the view that they will accept claims arising from sensibly worded agreements. The British Property Federation (developers' trade association) has agreed standard templates with most construction related professional bodies (RIBA, ACE, RICS included), which most insurers will accept. Insurers regard the acceptance of contractual liability beyond that normally owed by a professional to be beyond the intention of a Professional Indemnity policy. Therefore, unreasonable agreements could have very damaging effects on professionals, leaving them without cover. Most Professional Indemnity policies address the issue of collateral warranties by clearly setting out the limits beyond which cover will not apply. This should avoid the need to submit each and every agreement for sanction by the insurer, although if you are unsure then the best advice is to always check with your broker or insurer. Some of the more restricted policies offer very little cover in connection with this type of agreement, not even covering the British Property Federation agreements described above.

06. What are the pitfalls of buying Professional Indemnity Insurance (PII) on line?

In a price comparison world it is tempting to think of shopping for your Professional Indemnity Insurance cover on line, however there are a number of dangers in doing this. Unlike Motor Insurance, where most policies provide the same cover, there are many differences between the cheapest and most basic policies on offer and the rest. This is because Motor Insurance has been compulsory throughout Europe over many years now and the format for the cover and limits are laid down in established legislation. This is not the case for Professional Indemnity Insurance. Without specialist knowledge of the PII market it can be difficult to be sure not only that you are comparing like for like, but also whether the policy in question is actually going to cover you for the widest extent of the work that you are doing. For this reason, although it can be useful to search the internet for different providers and to get some idea of what is available and the price, it is always best to seek the advice of an Independent Broker such as PI Expert before proceeding with a purchase.

07. What are the most common mistakes that people make when buying Professional Indemnity Insurance (PII)?

One of the major issues that buyers of Professional Liability Insurance find does not arise until there is a claim. The issue that causes the most problems is that of breadth of occupation covered. What buyers of PI insurance are often unaware of is that the PI policy covers for them only for the activities that they have declared on their proposal form or when buying or renewing their policy. Claims which stray outside of this range of activities will not be covered by a Professional Indemnity policy. Take for example the case of the Architect who has declared on his proposal form that his work is 100% on low rise domestic buildings. If he even does one design for a commercial extension this will not be covered by his PII policy. Professional Indemnity policies that are bought online often suffer from this problem many quote engines will require the customer to choose one occupation when buying their PII insurance and if you choose the wrong profession then you might find that you have no cover for a substantial part of your work. For example an Estate Agents wording may not be suitable for many Estate Agents they may need the enhanced protection provided by a RICS Surveyors professional indemnity policy. PI Expert always advises customers to over declare it is better to be over protected so if there is some possibility, however small, that you might do a certain type of job, then you should put it on your proposal form, even if you rank it as 0.1% of your total projected turnover.

08. What should I look for when buying Professional Indemnity Insurance (PII)?

You should be looking for wide policy cover that fits your profession. This might sound simple, but as most insurers have 20 or more different wordings for Professional Indemnity Insurance this might not be as obvious or straightforward as it sounds. It is always best to ask the advice of an independent broker such as PI Expert if you want to get the correct policy fit for your profession. You should make sure that your broker has access to the whole of market for Professional Indemnity cover many general insurance brokers are not experienced in placing Professional Indemnity Insurance and will only have access to a limited number of insurers. Ask your broker who they will approach and ask to see evidence of the quotes that they have obtained. Each insurer has a speciality and preferred risk profile one size does not fit all. Other factors you should consider include what the Geographical and Territorial Limits of the cover are, the retroactive date, the basis of cover (Aggregate or Any One Claim) and whether the limit covers defence costs within the sum insured or if these are payable in addition to the cover limit. The excess will also be a major factor is this applicable to all claims or is it excluded from defence cost only claims? It is important to understand all of these terms and how they can affect policy cover. A good PI broker such as PI expert will always take these factors into account when putting together your quotation.

09. Why should I use a Professional Indemnity Broker rather than buying directly from an insurer?

Some insurers offer PII Insurance directly to the public and this might seem like a good idea the selling proposition may well be that their product offering is cheaper when you buy directly from them rather than buying form a broker. Sometimes this may be correct, although in most cases the price will be exactly the same - a broker may earn commission, but a direct insurer has to pay their own staff to service the policy so the end cost is not that different. The downside to the buyer of PI insurance is that if you buy direct and later have a claim which insurers dispute you will then have to pay an independent advisor to help you deal with the insurer or pay the claim yourself. If you use a Professional Indemnity broker such as PI Expert you will always have someone that will be on your side and available to advise you on your best interests (rather than the insurers) throughout the policy year.

10. What is so special about PI Expert and the service that they offer?

PI Expert is an Independent Professional Indemnity Insurance Broker. We have access to the whole Professional Indemnity Insurance market and can find the right policy, at the most competitive premium for you. We are required to always provide the best advice, so you can be sure that you will always be buying the most appropriate policy to suit your business and its individual needs. Unlike some brokers we are not owned by an insurer and our loyalty is therefore always to our clients, not to the bottom line of an insurance company. You can trust the advice that we give. We are authorised and regulated by the Financial Services Authority and you can check us out on their web site on their list of list of professional indemnity insurance (PII) brokers:- http://www.fsa.gov.uk/smallfirms/good_practice/protecting_your_business/list_of_brokers.shtml Many brokers, including some of the larger players, limit their Professional Indemnity sales to one or two preferred suppliers. This maximises the brokers earnings, not the competitiveness or extent of cover for the client. PI Expert puts client's needs before commission earnings and will always use the whole of market to source the best cover for each individual client. If you telephone PI Expert you will always speak to a named professional advisor, based in the UK, who will be able to help you. We do not use recorded messages, automated telephone systems or the type of technology that is designed to wind our clients up. We are emphatically not a call centre. PI Expert are on hand to help customers throughout the policy year not just at renewal and we are always pleased to hear from you.

11. How should I choose my Professional Indemnity Insurer?

When choosing a Professional Indemnity Insurer you should always be sure that they are of a sound financial pedigree. PI Expert uses Insurers who have an equivalent rating of A or above by Standard and Poor. You should choose an insurer who is a particular specialist in your area of expertise just because an insurer quotes a risk does not mean that they will have the experience you need in the event that a claim has to be defended. A PI Broker such as PI Expert will be able to advice which insurers are particularly experienced in your area of work. You should consider how flexible the insurer will be and whether they offer any additional services, such as collateral warranty reviews, during the year. What is the insurers reputation for claims paying and how do they handle claims? Is this in house or outsourced? If outsourced is this in the UK? Will they listen to you in the event that you would like a claim defended or will it just be paid to keep costs down? These are just a few of the factors that PI Expert will take into account when selecting an insurer to cover a client.