Professional Indemnity Insurance
Professional Indemnity Insurance (PII) provides cover for practitioners against claims for professional negligence or loss through fraud or dishonesty.
Having appropriate PII is mandatory.
You must be able to demonstrate that you have appropriate indemnity cover for claims against you arising out of your professional work, this cover must be in force for the period for which the certificate is intended to be valid and include two years retroactive cover on a similar basis following cessation.
It is your responsibility to obtain adequate cover with a reputable insurance Levels of Cover.
Level of Professional Indemnity
PII must provide cover in respect of all civil liability incurred in connection with the conduct of a firm’s business by the partners, directors or employees.
The limit of PII you require is dependent upon your total income for the previous accounting year. Your total income is the cumulative total of your professional charges and all other income received through your business, including commissions retained.
The regulations set the minimum level of PII you are required to hold. You should consider the risk profile of your work and your clients and decide whether you need to hold PII in excess of the minimum requirements.
The minimum limit of indemnity on PII for all Members in Practice must be:
- If your total income in the previous accounting year is less than £400,000 (exclusive of VAT etc.), the minimum amount of indemnity must be equal to two and a half times the total income, or £50,000 in the case of a sole practitioner, or £100,000 in any other case, whichever is the greatest.
- If your total income in the previous accounting year is over £400,000, the minimum amount of indemnity must be equal to £1 million.
The maximum permitted excess for PII is £20,000 or two percent of the level of indemnity for each claim, whichever is the lowest amount.
It is your responsibility to ensure that the PII cover remains in place throughout the period your practising certificate is in force and that cover is maintained for six years following cessation of your practice. This is to cover instances where claims are made later for work undertaken while you were in practice.
Additional Requirements for Members in the Republic of Ireland
The minimum limit of indemnity on PII for Members in Practice must be:
- Where the amount of the total income from fees in the year immediately preceding that to which the insurance relates is less than €400,000, exclusive of VAT or other similar tax, a sum equal to two and a half times that amount subject to a minimum indemnity of €50,000 in the case of a sole practitioner and €100,000 in any other case; or
- Where the amount of such total income is €400,000 or more, €1 million for any one claim and in all; or
- Where he is a member of a Recognised Supervisory Body such amount as shall be agreed as appropriate by the Association; excepting that
- A Member engaged in Insolvency practice must obtain minimum cover of €1,500,000 (exclusive of defence costs) in respect of each and event claim, and obtain cover for defence costs, in compliance with the Companies Act 2014 (Professional Indemnity Insurance) (Liquidators) Regulations 2016 (S.I. 2016/127).
Documentation
You are required to provide copies of your PII policy certificate when applying for your practising certificate. You must also keep records of any insurance claims made under these policies. The policies and any claims records may be inspected by the AIA as part of their monitoring process.
Renewal and Changes to your Business
Each year you are obliged to submit a practising certificate renewal form, along with your subscription and renewal payments, which is used to update AIA’s information on your business.
You must inform AIA if there have been any changes to your business within 30 days.
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