Professional Indemnity Insurance for Accountants

If you are a member of a professional institute or association then you will be required to purchase professional indemnity insurance.

PI Expert is able to provide insurance cover that meets the requirements of all of the professional bodies that represent Accountants and Book-keepers in the UK. We are also able to provide cover for any person who gives advice in this area or offers similar services in a professional capacity.

Our specialist, experienced and dedicated accountants professional indemnity team has access to all qualifying insurers which enables us to offer the most appropriate advice and most cost-effective professional indemnity insurance available. To obtain a no obligation accountants professional indemnity insurance quotation, simply download and complete one of our accountants PI proposal forms. Alternatively, send us a copy of the insurance proposal form completed for your existing broker.

If your insurance policy is not yet due for renewal, register your interest now and we will arrange to contact you prior to the renewal of your current policy.

Accountants PI Insurance Frequently Asked Questions

What does professional indemnity insurance cover?

Professional Indemnity insurance provides cover in the event that there has been some form of financial loss accruing to your client due to professional negligence. This would normally be because advice has been provided incorrectly. For example, if a tax return was not completed correctly by the accountant and as a result the client has to pay for additional fees or a fine. It would also cover a situation where client is advised to do one thing but it turns out they should have done something else and they suffer financially because of that negligent advice.

Depending on the insurer, PI Insurance can cover other things such as Data Protection breaches, loss of documents and costs for attending court in the event of a claim.

Who does professional indemnity insurance cover?

In all insurance contracts, you can find out who your insurers are actually covering by looking in the policy wording. This will normally define the persons covered as “You/Your” and in most cases, this will be the company, past, present or future partners, members or directors and any Employee.

It is worth noting that insurers may not automatically cover past or future directors/partners/principals unless they have been specifically advised that you require cover for these individuals and that the policy covers any past trading styles or previous company names.

What level of PI cover do I need as an accountant?

There are a number of things to consider. For example, most accountants are regulated and are required to have a minimum level of PI insurance cover. As of September 2018, the following limits of PI cover are required by the following regulation bodies:

ICAEW (Institute Of Chartered Accountants In England and Wales)

If the firms turnover is in excess of £600,000, the minimum level of professional indemnity required is £1,500,000 for each and every claim and in total, unless. However, there are some additional points  you will want to note:

  • If the income of a firm is less than £600,000, the minimum limit of indemnity for any one claim and in total must be equal to two and a half times its gross fee income, with a minimum of £100,000
  • If the firm undertakes insurance mediation activities, the minimum level of cover required will be €1,120,200 for any one claim and €1,680,300 in total.
  • If a firm is an accredited probate firm, the minimum limit of indemnity required for authorised work (ie, probate and estate administration) is £500,000 for any one claim.

ACCA (Association of Chartered Certified Accountants)

The ACCA regulation body defines the limit of indemnity held by its members by the level of turnover the firm produce

Total income of up to £200,000 Total income of over £200,000 and up to £700,000 Total income of over £700,000
The greater of:

  • 2.5 Times the total income;
  • £50,000
An aggregate limit of £300,000 £1,000,000

If, however, the sum of 25 times the largest fee raised during the previous accounting year is greater than the above amounts, the limit of indemnity should be 25 times the largest fee. For example:

Example A Example B
Company Turnover of £10,000

Largest Fee Income £500

  • 2.5 x £10,000 = £25,000
  • 25 x £500 = £12,500

Minimum Level of cover required as per the regulation: £50,000

Company Turnover of £10,000

Largest Fee Income £2,500

  • 2.5 x £10,000 = Limit of Indemnity £25,000
  • 25 x £2,500 = Limit of Indemnity £62,500

Minimum Level of cover required as per the regulation: £62,500

AAT (Association of Accounting Technicians)

All policies must meet the following minimum level of cover:

  • The policy is written on an ‘any one claim’ basis
  • Cover is written on a full civil liability basis
  • Cover is fully retroactive

In addition to these requirements, the AAT also stipulate that the indemnity limit should be the greater of:

Sole Traders Partnerships and Limited Companies
2.5 times the firm’s gross fee income; or

·       £50,000

2.5 times the firm’s gross fee income; or

·       £100,000

If a sole trader or a partnership/limited company has a gross fee income in excess of £400,000, the minimum level of cover required will need to be no less than £1,000,000

Unregulated Accountants

Unregulated accountants are not required to have any form of insurance in place, however, this is not recommended. All it takes is for one calculation be slightly wrong or for a disgruntled customer to make a complaint against you and you could potentially be liable for hundreds, if not, thousands of pounds just to defend yourself. Even if you provide advice to someone and they don’t actually use your services, you can still be sued for providing negligent advice. Professional Indemnity insurance provides you with cover to defend yourself, regardless as to whether you are found at fault for being negligent or if the allegations being made against you turn out to be false.

Special Notes for all Accountants

As most of the regulators base their requirements on your turnover, you might be tempted to reduce your cover limit from year to year. You should resist the temptation to do this as the limit that is current will be the amount that applies to all claims, even if the work was carried out in the past. This is especially important if you have a contract with a third party which stipulates that you carry certain limit of cover in place.

Do I need to notify my regulation body of my PI insurance details?

ICAEW Members

The ICAEW require you to update them every year with details of your insurance policy. On occasion, they may ask for a copy of your insurance documents for their records

ACCA Members

The only time you need to get in touch with the ACCA is when:

  • You first take out a professional indemnity policy
  • You move to a different insurer at your renewal
  • Your insurance policy number changes

If you renew your policy with your existing insurer and your policy number doesn’t change, you will not be required to discuss this with the ACCA.

AAT Members

You are only required to inform the AAT of your insurance policy details when you first apply for membership with the AAT. Unless specifically asked, when you renew your membership every year, you are not required to advise the AAT of your specific insurance details.

Are PI Expert associated or affiliated with any of the regulatory bodies?

PI Expert is independent and all of the policies we recommend are compliant with the regulator’s requirements. We do not pay introducers fees or commissions to any of the regulatory bodies.

The regulators are very clear to both their members and other insurers in respect of the cover that is required to be in place. Many insurers have individual insurance wordings and products which are designed specifically to meet the requirements of the ICEAW and the ACCA as well as a general wording for accountants who are not regulated.

What should I know if I decide to move from my existing PI insurer?

The first thing you should know is that not all policies are the same, although a lot of accountancy wordings are going to be very similar in the cover that is being provided and when moving from one insurer to another. It is important to understand the differences between each policy.

For example, some policies will automatically provide cover for the dishonesty of senior executive employees or computer virus and hacking attacks as well as the basic risks you.

Covering past work – what is Retroactive PI Cover?

Because of the way claims work under a professional indemnity policy, claims will be made on the policy that is in place at the time the claim is bought to the attention of the policyholder, not the policy that was in place when the work was done. It is therefore particularly important to make sure that the retroactive date on your policy is correct. The retroactive date on a professional indemnity policy is an agreement with the insurer that states that the insurer will provide cover for all of you work from that date during the policy period. So if a policy has a retroactive date of 1st April 2014, any work done on or after the 1st April 2014 will be covered, but no cover will be provided for work done prior to this date.

Some policies will state “None” as their retroactive date or they won’t provide a retroactive date at all. In these circumstances, the insurer is providing what is referred to as “Full Retroactive Cover” so all past work is being covered, this is typical of policies issued to entities that have been trading for a while. In order for the retroactive cover to apply, insurers will expect for you to have held professional indemnity insurance in place continuously from that date in order for an claim during that period to be honoured.