Guide to Buying Professional Indemnity Insurance

There are several ways to obtain professional indemnity insurance quotes

Online PII quotes are now available unfortunately at present usually from one or two suppliers, this of course will change in the future, although for larger companies with contracts, agreements and diverse area work, you would almost certainly need to give a full presentation and complete a proposal form to obtain quotations on professional indemnity.
Full brokering services, where you complete a proposal and submit with CV’s and background of your company or business activities, the broker will then approach lots of suppliers on your behalf.
Direct with one supplier where again you could either complete an application or quote questionnaire.

How do I know if the policy I am buying is suitable for my needs

We have produced a quick reference guide for the more traditional professions, and some overall limits that may help you if you are about to purchase a professional indemnity insurance policy.

How do you obtain the right policy with the correct wordings at the right price?

There are several options:

Purchase the policy online, although at present there are only a few quote and buy websites, with not a lot of insurance companies to choose from. In addition some of the professional indemnity insurance policy wordings are not offering very wide covers - for example, aggregate covers with UK jurisdiction, which although very competitive may not suit companies offering their services outside the UK or who need an "any one claim" policy.
Submit your full details by email / fax by a downloadable proposal form, or complete a questionnaire online and submit by email. If you use this method to obtain your quotes, it will be in your interest to appoint a specialist Professional Indemnity Broker who will know the best insurers and underwriters to approach. When submitting your information to them it is always advisable to forward your key personnel's CV's and a good background of your business activities.
‘Live Broker’ internet links - very few companies in the UK have this technology as yet, but it is an excellent way to speak with a specialist professional indemnity broker to discuss your requirements. This enables you to see and hear and correspond with the broker from any where in the world, at the same time.

Tips for purchasing Professional Indemnity Insurance

If you are one of the traditional professions solicitors, IFA, Surveyor or larger business or practices you are unlikely to obtain online quote and buy policies, you need to seek out a good specialist PI Broker to obtain the right covers and competitive quotes. Although there are some very good prices for smaller architects, accountants and engineers that can be purchased ‘on line’.
If you have been asked to obtain cover because of a contract or you are about to be awarded a contract subject to proof of your Professional Indemnity cover you really need to check out that that agreement contract does not extend your liability under any policy that may be issued, as you could be voiding your PI before you even purchase it, always seek separate legal advice before agreeing such contract wordings and at the very least ask your broker to consider whether the policy would respond to such a wording (they can not give you legal advise) but should be able to point you in the right direction.
Look out for wordings that maintain bodily injury, property damage, consequential loss, more than 2 assignments, the expected ‘how’ i.e. UK / USA EEC any form of guarantee etc.
For those professions outside the traditional architects, solicitors, accountants, engineer, surveyors, insurance brokers, IFA’S, try to get your professional indemnity insurance policy to include the following covers:
1. 'Any one claim' (AOC) or 'Each and every claim'
2. Lowest Excess
3. Worldwide Cover (Excluding USA / Canada) or, where necessary, including USA /Canada
4. Accidental Infringements of Intellectual Property
5. Breech of copyright or confidentiality
6. Bodily Injury Property Damage (where it was relative to professional advice)
7. Excluding losses and expenses on the level of indemnity and the excess
8. Civil liability wordings (if possible)
For the construction industry professionals (including architects, engineers, surveyors and solicitors) we have produced a helpful guideline about Collateral Warranties.

How much cover is required?

Individual professions can assess the amount of cover appropriate to their business. However in many cases this is determined by an authorising professional body which lays down the criteria and covers required often with minimum levels of indemnity and excesses. If in doubt you should check with your own authorising body, although as a professional indemnity insurance broker, we will be able to advise you of the different requirements required for your particular profession.

For others trying to determine how much cover to effect, it is important that a realistic view is taken of the potential damages and legal costs for which the business could become liable. Being under-insured can be almost as financially disastrous as being without insurance at all - as the examples below reveal.

We recommend that no insurance policy is taken out with a limit of less than £250,000. We will, however, provide a quotation for lower levels of indemnity if asked to do so. We are also able to provide cover up to a limit of £20,000,000 in most cases.

Any professionals in doubt about the amount of cover they should take out should consult their legal advisers.

The following examples highlight the dangers of being under-insured:

Case 1:
It was alleged that surveyors were negligent in their valuation of a property on behalf of a lender.
Loss: £1.5million
Insurance: £1million
Shortfall: £500,000

Case 2:
A consulting engineer designed a roof which proved to be defective.
Loss: £350,000
Insurance: £100,000
Shortfall: £250,000

Case 3:
A design consultant provided designs for tools to be used in manufacturing process. It was alleged that the designers were inaccurate.
Loss: £150,000
Insurance: £100,000
Shortfall: £50,000

The following examples highlight the importance of Professional Indemnity Insurance:

A business wished to be known by a particular trade name. After consulting with company registration agents, it was told that there was no objection to its chosen name. Proceedings were issued by a company with a similar name and £20,000 was paid by the company registration agents.
Detailers prepared structural drawings for the erection of steelwork. It was subsequently alleged that the drawings contained errors and £110,000 was claimed for the costs of alteration and the resulting delays in construction.
An auctioneer sold property at auction over a number of years. It was alleged that the property was stolen and a claim for £250,000 was brought against the auctioneer.
It was alleged that consulting engineers were negligent in their design of waste heating boilers.
A claim for £4million was brought for the cost of extra work and the resulting delays. An estate agent missed the opportunity to carry out a rent review because of a defective rent review.

In summary

Upside
The best way to obtain terms quickly is if you are a small to medium size company would be perhaps ‘online’. The professional indemnity policy can be issued on line so you can get immediate cover.

Downside
You may not be aware that if the policy suits all your needs
Professional indemnity insurance is a complicated subject and if you are purchasing it for the first time, it maybe as well to chat to a professional indemnity broker, before buying online.