ACCA Professional Indemnity Insurance (PII) regulation update

What are your average and largest fees? What’s a typical total project value?

13. Tax investigation overlap with PI

Your professional indemnity insurance needs to cover the total cost of correcting your mistakes and the legal costs of a claim against you. For example, a client sues you and the total bill to fix your error, compensate them, and pay each party's legal expenses comes to, say, £300,000. If your level of cover is only £250,000 you’re faced with meeting the £50,000 shortfall yourself. Are your clients small businesses or large multinationals? Are they in 'rich' industries like banking, finance, or IT?

Strategic Professional

Are they by-the-book or more laid back? As a consultant or contractor, you’re up against it. Big companies won’t hesitate to unleash the might of their legal department or corporate lawyers if they think there’s a reason to claim. And if they do claim, they won’t go easy. If you find yourself on the bet sports betting odds comparison site receiving end of an expensive-looking lawsuit, your policy needs enough weight to cover all the potential costs of defending you and compensating your client. Is your client expecting either a revenue boost or a cost saving as a result of your work? Don’t assume you can only be sued for the amount your client pays you.

Getting a quote for professional indemnity insurance

The Financial Conduct Authority (FCA) is the regulator of the financial services industry in the UK and regulates the conduct of nearly 42,000 businesses, prudentially supervises around 41,000 firms and sets specific standards for around 17,000 firms. Unlike the regulators that regulate professional services firms, such as the Solicitors Regulation Authority (SRA) and the Institute of Chartered Accountants in England and Wales (ICAEW), the FCA is not a professional body. Instead, the FCA serves as a financial regulatory authority in the UK. It operates independently of the government and is funded through fees charged to members of the financial services industry. All financial services firms, consumer credit firms and investment firms have to be authorised by the FCA, including individuals who are providing To view the latest version of this document and thousands of others like it, sign-in with LexisNexis or register for a free trial.

3.5 Participating Insurers and the master policy regime

Unlock the full document with a Lexis+ free trial A question customers often ask us is: 'How much professional indemnity insurance do I need?' And what we usually advise them is: as much as you can afford. But bear with us because there’s method in our vagueness. The problem we have is that there isn't a one-size-fits-all rule. That makes it difficult for us to say precisely how much professional indemnity (PI) insurance is enough. So we get you to tell us instead. To some extent, you can limit your liability by contract, sure.

• Consideration for higher limits based on client contracts or sectors
• Joint audits may require specific provisions in the PI policy
• Insured must disclose all material facts to the insurer
• Retroactive date is a critical policy feature to review
• Notification of circumstances clauses must be adhered to strictly

But if things go wrong and a court decides you’re liable for more, you’ll have to pay it. If your work is part of a larger project and your client alleges your mistake is responsible for delaying or disrupting it, they’ll sue you for their total loss. Bear in mind many projects, particularly those in architectural work or involving large-scale IT changes, can cost many £millions.

You don’t want a bill like that through your door. There are many industries for whom PI insurance isn’t optional. For accountants, surveyors, and many other professionals, it’s a necessity. If you’re a member of a professional body, like the ACCA for accountants or RICS for surveyors, you’ll need to maintain a minimum level of of professional indemnity insurance cover to qualify as a member. The requirements are different for every professional body. You might also be legally required to have professional indemnity insurance if you land a big contract. Especially if it’s in the public sector. This gives your client peace of mind that any problems won’t leave them out of pocket. Professional indemnity (PI) insurance protects you against allegations of negligence and the legal costs of defending you, regardless of the claim's validity.

Cost: ACA vs ACCA

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 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 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. 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. PI Expert is independent and all of the policies we recommend are compliant with the regulator’s requirements.

Accountants Insurance 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. 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. That's important because even if you're 100% sure you didn't mess up, it doesn't mean clients or third parties can’t claim you did. And if that happens, doing nothing about it isn't an option. Getting a solicitor to help won't be cheap. The cost of your defence could easily run into many £tens (or even hundreds) of thousands if the claim is complicated or protracted.

• Minimum indemnity limit typically £50,000 for members in practice
• Cover must be provided by an insurer authorized in the UK
• Policy must cover civil liability from professional business activities
• Run-off cover required upon retirement or cessation of practice

In fact, in many claims, the legal costs are larger than the amount that’s claimed for. So make sure you choose enough cover to pay a claim's potential legal costs. The type of professional indemnity policy you go for is almost as important as its level of cover.

In the aggregateIf you buy a policy with, say, £250,000 cover 'in the aggregate', that's the maximum amount the policy will pay for the accumulated total of all claims made against you in one policy period. If you were unlucky enough to have, say, three claims against you and their combined costs are more than £250,000 then you’d be a bit stuck. Any one claimIf, on the other hand, you bought £250,000 cover for ‘any one claim’ then you're covered for unlimited claims, up to a maximum of £250,000 for each one. Though you'd still need to be careful and check if there’s an inner limit (or ‘sub-limit’) attached to your policy.

What does a professional indemnity insurance policy cover?

We do that by making you think about these things: what you do, who you do it for, and what it's worth. Your answers help build a picture of your business's risks – the things that could go wrong and ultimately lead to a claim against you. And that, in turn, helps determine the level of PI cover you need. Figuring out how much professional indemnity insurance you need can be a little confusing. There’s lots to consider but don’t overcomplicate it.

9.1 The IFA minimum

Take it step-by-step using our list below: What do your clients ask you to do for them? Worst-case scenario, how much will it cost to put right? Also, how much business do you do? If your turnover is relatively high, you've either got lots of clients or fewer, high-value clients. Either way, claims are more likely and/or will be for more money. As that could limit how much your insurer pays out for certain categories of claims. When it comes to PI, inner limits are usually placed on things like intellectual property disputes and claims involving lost documents which need to be restored.

AKA 'risky' areas that cost insurers lots to fix. So it’s really important you read your policy wording carefully and speak to your insurer (or a broker like us) if you think you need more cover.

10. ICPA member PI scheme

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. 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.

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

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. This Practice Note describes the professional indemnity insurance requirements for FCA-regulated professionals. These requirements apply to all financial services firms, insurance firms, consumer credit firms and investment firms, including individuals who are providing services within the sector. A word of warning about reducing your level of cover. We're sometimes asked about this by customers who've been working on high-value contracts that have come to an end. The thing about reducing your level of cover is that it changes your policy retrospectively too.