What is professional indemnity insurance?

Professional indemnity (PI) insurance in the UK is a type of business insurance that covers the cost of compensating a client for loss or damage resulting from negligent services or advice. It is also known as professional liability insurance. 

Key Features

• What it covers: It typically pays for legal defence costs and any compensation awarded if a client sues for professional negligence, errors, omissions, or breach of duty.
• Specific risks: Common covered risks include breach of confidentiality, defamation (libel and slander), loss of documents or data, and unintentional infringement of intellectual property rights.
• Claims-made basis: Most PI policies in the UK are "claims-made," meaning the policy must be active both when the work was done and when the claim is reported to the insurer. 

Who Needs It?

While not a universal legal requirement, it is compulsory for certain professions regulated by professional bodies, including: 

• Solicitors (regulated by the Solicitors Regulation Authority).
• Accountants (such as those under ICAEW or ACCA).
• Architects (regulated by the Architects Registration Board).
• Financial Advisers (regulated by the Financial Conduct Authority). 

Other professionals like IT consultants, marketing agencies, and management consultants often carry it to meet contractual obligations or to protect against personal liability. 

Important Policy Terms:

Retroactive Date: A date in the policy before which any work done is not covered, even if a claim is made while the policy is active.

Run-off Cover: Protection for claims brought after a business has stopped trading or a professional has retired.

Indemnity Limit: The maximum amount an insurer will pay. This can be "any one claim" (full limit for every claim) or "in the aggregate" (total limit for all claims in a year).

At present, we can provide Professional Indemnity cover provided by AIG. Maximum limits up to £2 million. 

Professions covered: • Accountants - ICAEW compliant • Architects • Engineers • Design & Construct • Management/Business Consultants • Marketing & Media • Miscellaneous • Technology 

Professions not covered: • Surveyors • Solicitors • Insurance Brokers • Financial Institutions

Here are some examples of who could benefit from professional indemnity insurance, with examples of why they might need it:

Who?
Accountants and business management consultants

Why?
A deadline to file paperwork with HMRC is missed, resulting in your client incurring additional costs. They claim against you for their financial loss. Find out more about professional indemnity insurance for accountants here.

Who?
Business and management consultants

Why?
A business plan provided to a client doesn't deliver the expected results. They claim against you for their financial loss. Find out more about professional indemnity insurance for consultants here.

Who?
IT contractors and consultants

Why?
A website, application or software provided to your client isn't fit for purpose. They claim against you for the cost of putting the mistake right.

Who?
Technical and engineering contractors, surveyors and architects

Why?
Some CAD (computer-aided design) work you undertake for a client contains the wrong measurements, causing long delays to your client's project. They claim against you for the cost of putting the mistake right. Find out more about architects professional indemnity insurance here.

Who?
Creative and marketing professionals, including web designers, graphic designers, marketing consultants and photographers/videographers 

Why?
A client alleges that the photographs you have taken aren't suitable for use, or a memory card corrupts and you lose all the day's shots. They claim against you for the cost of re-organising the shoot.

Who?
Teachers, tutors, instructors and trainers

Why?
A client injures themselves during a personal training session. They make a claim against you alleging that you failed to properly explain how to perform the exercise.