What Is the Minimum Professional Indemnity Cover Required for Accountants?

Many insurers use their own policy wording and, in some instances, this will include extensions of cover beyond the cover that is required under the minimum wording. Participating insurers which use a different policy wording must also include a difference in conditions (DIC) clause in the policy and, as an extra safeguard, in the absence of an express DIC clause, it will be deemed to apply.

16. Sole-practitioner economics: why small does not mean cheap

You know it, we know it, and accountancy business owners certainly know it. From rising costs to fierce competition for customers, it’s no wonder insurance sometimes gets pushed to the bottom of the pile. But every SME needs a safety net. Just look at the stats: BIBA data suggests nearly one in five businesses suffer a major disruption every year. For smaller companies, even the slightest mistake or bad luck can leave it struggling to survive.

Client base

This is why having fit-for-purpose professional indemnity (PI) insurance makes so much sense. With 26% of the annual total insurance claims in the UK relating to professional indemnity issues, it helps accountancy firms manage risk, and ultimately helps protect the business if an error should occur. Whilst it is not a legal requirement for accountants to take out PI insurance, for many accountants (such as members of the ICAEW, ICAS or ACCA) it is a regulatory requirement to buy PI cover that complies with the respective association rules. These rules can not only set out the limits required, but also mandate the specification of the wording and the Insurers that can be used. For those “unregulated” firms, PI cover is still arguably a business necessity to provide the firm with the requisite legal expertise and financial resources to ensure the stability of their business should the worst happen.

7.1 The ATT minimum

With PI cover, mistakes can be sorted out quickly and easily, with minimum disruption and expense. Even if it’s never used, having PI insurance provides reassurance for clients, giving them one more reason to trust an accountant with their finances. Within a heightened regulatory environment, the combination of more intervention and evolving standards means an increase in the number of claims. Here are four scenarios where PI Insurance has helped an SME accountant faced with a claim… An accountancy firm fails to comply with HMRC filing deadlines resulting in penalties for the client. An accountant fails to warn a client that the transfer of shares prior to the sale of a business will trigger a CGT charge. In the event of a dispute between a policy holder and their insurer, the difference in conditions clause should ensure that ICAEW's minimum wording overrides any provision in the insurer's wording that is less favourable to the insured.

All ICAEW compliant policies should include a DIC clause and there is provision in ICAEW’s contract with each insurer for firms to enforce this requirement. If you require further information about this, please call +44 (0)1908 248 250 or use our Live Chat service.

• Fines for non-compliance with Employers' Liability insurance are enforced by the Health and Safety Executive (HSE).
• Operating without required motor insurance can lead to vehicle seizure, fines, and penalty points.
• Breaching contractually agreed insurance levels can lead to contract termination and legal claims.
• Operating without mandated Professional Indemnity can result in disciplinary action from your regulatory body.
• Inadequate insurance can lead to personal liability for directors if the company cannot cover claims.

ICAEW recommends you take necessary steps to ensure there is no gap in insurance cover which would be a breach of the PII Regulations.

Run-off Insurance

A complex claim as the client may not have warned the accountant of their intentions. An accountancy firm acting as auditors for a client fails to detect fraudulent activity in an investment opportunity. A complex case as the wrong doer will have gone out of their way to cover their tracks. An accountant uses third-party information to research the latest tax insights. Taking the information at face value, they give the wrong advice leading to losses for the client.

What are the regulatory requirements?

Be aware of the regulatory status of your client and the impact of this on the limits and cover you need to recommend and the markets you can and cannot approach. The primary capacity that Aqueous have secured is all fully compliant with the necessary accounts regulatory bodies. Beyond regulatory hygiene, be clear about what matters most to your clients and how they operate. Each one is different, so you need access to a range of products that can be tailored to your customers’ needs. Look for comprehensive products that are simple and quick to arrange.

How long should I hold run-off insurance?

At Aqueous, quoting and binding on our e-trade platform can take less than five minutes, with experienced underwriters on hand to give you all the information you need. All our products are underwritten by A-rated (or above) insurers, meaning quality and reliability is guaranteed. Each product has been carefully designed to cover the risks faced by specific professions, based on our experience of the market. A comprehensive PI policy is an effective and efficient way to manage risk. As time-pressed business owners, your clients want to get the right cover without hassle or fuss. Firms have a legal obligation to make a fair presentation of the risk on taking out or renewing cover. Therefore, in order to safeguard the indemnity available for a claim should it arise, it is essential that firms are open and transparent with their insurer/prospective insurer when taking out or renewing cover as to: their claims history and any potential claims (or grounds to suspect a claim - ‘circumstances’); In-depth and complete information should be provided at the outset of the renewal process in an effort to make proposals more attractive to insurers, and to assist in obtaining a timely response from insurers as to whether cover terms will be offered. The duty of fair presentation was introduced by the Insurance Act 2015. The PII Committee recommends that firms prepare early for their renewal and that they take advice from a trusted and reputable broker or other adviser when taking out their insurance. The committee recommends firms discuss their placement strategy with their broker to ensure access to a number of different insurers; specifically, firms may wish to clarify whether their brokers are ‘whole of market’ brokers. If firms are unable to obtain a new policy before their current policy expires, they should note that their last insurer is required, under the minimum approved wording, to extend cover for an additional 30 days (see clause D3).

How much PII does an accountant need?

At Aqueous, we pride ourselves on the human touch. Professional underwriters offer personal attention and are always available if you need to discuss a policy. Why not get in touch with Aqueous today to discuss your clients’ needs? – Authored by Stuart Barker, Head of Business Development – Professional Indemnity LEP will arrange cover to meet with your regulatory requirements under the ICAEW, ACCA and ICAS, or other, as a minimum. We do not believe that there is a one solution fits all product so any Minimum Terms & Conditions are exactly that.

1.1 Statutory and quasi-statutory roles

We will work with you to understand any unique business requirements that you may have in providing a bespoke Professional Indemnity Insurance solution. We are mindful of your evolving world and your need to be offering services beyond that of the traditional accountant. This may include bet betting promo codes for existing customers outsourcing services, corporate finance or software management to name a few. There are also the additional risks that may be associated with your membership of an accountancy network or international associations. As a client of LEP you will receive a proactive approach to your insurance requirements.

Policy Documents

We can undertake a confidential review of your current arrangements and work with you to ensure that you have best value and cover available for your business. The regulations relating to audit, insolvency, probate, investment business and the eligibility requirements for a practising certificate (PC) all require members and firms to comply with ICAEW's PII Regulations. The PII Regulations give details of the amount of insurance required, insurers and the policy wording insurers must use. Qualifying insurance is underwritten in terms of the minimum wording, which is approved by ICAEW. Policies must use this wording or contain a difference in conditions endorsement. There can be a lot to think about when you are deciding to close down a firm, including securing appropriate run-off insurance. Run-off insurance responds to claims for work done while in practice but arising after the practice has ceased. Insurers take a cautious view of insuring firms that advise on or introduce clients to tax mitigation schemes.

• Public Liability insurance is not a legal minimum but is often required for contracts and leases.
• Professional Indemnity insurance is a legal requirement for certain professions like financial advisors.
• Motor insurance is a legal minimum for any company vehicles, with at least third-party cover.
• Product Liability insurance may be required if you manufacture, supply, or repair goods.
• Directors' and Officers' Liability insurance is not legally required but is critical for risk management.

Section 8 of the guidance, Professional conduct in relation to taxation, gives advice to firms on how they should deal with tax schemes, including if the only involvement is to make introductions to other firms.

Contact Us for More Information

ICAEW PII minimum approved policy wording – effective from 1 September 2021 Schedule of amendments to the PII minimum approved policy wording (1 September 2021) Non-members can download an order form to obtain historic copies of ICAEW's minimum approved policy wording. You must obtain the insurance required by the PII regulations from a participating insurer. These insurers have agreed to meet the requirements of ICAEW's minimum approved policy wording. The fact that an insurer is on the list does not imply that ICAEW has performed independent checks on the insurer's suitability. ICAEW recommends that you investigate the current ratings and discuss with your brokers the suitability of these insurers when you take out or renew your insurance.

Professional indemnity insurance

When obtaining PII or renewing existing cover, you should ensure you arrange qualifying insurance and check the following: The insurer is on the list of the current list of participating insurers (and if the insurance is provided by more than one insurer, that all insurers are participating). The cover meets the minimum limits of indemnity set out in ICAEW’s PII Regulations. The policy provides cover which meets ICAEW’s approved minimum wording and includes at least six years’ retroactive cover (ie, cover for claims arising in relation to advice, services and business activities carried out during the last six years). Please also remember to check that the policy complies with ICAEW's updated requirements that took effect in September 2024. All participating insurers have agreed to provide cover under terms that match those of ICAEW's approved minimum wording.