Professional Indemnity Insurance guide

Professional indemnity insurance – or PI insurance as it’s also known – is one of the most useful but least understood of all insurance covers.  In this guide to professional indemnity insurance, we’ll explain what PI insurance is, how it can help protect your business financially, and give you some tips on saving on your professional indemnity insurance quotes. 

What Is Professional Indemnity Insurance?

Professional indemnity insurance offers financial protection should a client or other third party sue you or your business for giving poor advice or a negligent service that results in financial or reputational losses.  Claims can be brought even if you provided a service or offered advice for free.  PI insurance is now regarded by many as a critical cover for many organisations and individuals. 

Who needs professional indemnity insurance?

If your business gives advice or offers a service, it would be wise to have PI protection in place, especially as professional indemnity claims are on the rise in the UK.  According to the Association of British Insurers (ABI), the number of small and medium-sized enterprises (SMEs) and consultants that have taken out professional indemnity cover has surged in the last few years.  As the business world becomes more litigious with no-win, no-fee legal services available, more people are seeking the financial protection it can offer.  Businesses that commonly have professional indemnity insurance include: 

• Law firms – as lawyers and solicitors spend their day providing advice, are privy to confidential, often sensitive information and work under civil or contractual liability, they are at risk from potential claims.
   
• Financial advisors – this is another advice-based sector, and if clients lose money or feel the advice they have been given has led to their investments underperforming, compensation claims could follow.
   
• Estate agents – advising on valuations and handling sensitive information means PI cover is worthwhile.
   
• Accountants – as well as reviewing confidential reporting, accountants often give management advice and so need professional indemnity cover in case their clients feel their service or advice has been negligent.
   
• Architects – clients depend on their expertise to get their building projects off the ground.  If there’s a problem, then the client could sue and the cost of compensation could be high. 

• Private tutors – negligence and contractual liability are the main risks for private tutors.  They can be held responsible for not meeting attainment targets or providing a service that is not professional or carried out without due care.
   
• Marketing agencies and consultants – while most agencies will undertake agreed work – be that designing flyers or building websites – they will often also give direction on the strategy they should adopt and the creative routes they will follow.  This is all advice and leaves them open to claims if the campaigns they’ve devised are felt not to have lived up to expectations.
   
• IT providers – if clients’ systems don’t perform effectively, are compromised, lose data, or go down, then your business could face claims for compensation.  With cyber-attacks on the rise in the UK – Hiscox reported in 2023 that 53% of UK businesses suffered at least one cyber attack in 2022, up from 28% in 2021 – this is a growing threat. 

These are just some of the organisations that can benefit from professional indemnity insurance protection.  If you’d like to know how it can help yours, get in touch and one of the Jensen Insurance Brokers team will contact you. 

What can professional indemnity insurance cover?

 There are a number of potential causes for professional indemnity claims being brought, and these include: 

• Negligence – every professional has a duty of care to their client.  This means they must act with and deliver their services to a high standard by taking reasonable care.  The Supply of Goods Act 1982 states there doesn’t need to be a breach of a specific contractual agreement for you to be liable for negligence, i.e., you can do as the contract says you will but still be found to have been negligent.  If you are working independently – as an IT consultant, for example – such liability could fall on you personally and could leave you facing high legal costs and compensation to pay
   
• Breach of duty – a breach of duty is when you or your company fails to fulfil the duty you promised the client.  This could be by either delivering below-par advice or not providing a service you’d agreed to.  In some cases, you can be left personally liable for the costs and damages if a claim is brought.  Professional indemnity insurance can cover these costs for you.
   
• Civil liability – looks at the effects of the advice or instructions rather than assigning fault with the initial advice.  You’ll need civil liability cover if your advice leads to injury or illness instead of financial loss.  If you undertake consultancy work, this will be more relevant to you. 

• Loss of documents or data – losing documents or data or sharing data or sensitive information without the owners’ consent.  Be you a solicitor, an accountant, or a data controller – such as a marketing consultant – you could be held personally liable for the loss and face hefty penalties. 
   
• Contractual liability – this is important if you sign a contract with another company and assume liability on its behalf.  It protects you if you’re held liable for failing to uphold the terms of an agreement.  It affects service-based and advice-based businesses.
   
• Defamation – if you make false or defamatory statements about a person or an organisation, you could be sued for damages.  It’s beneficial for those in the journalism industry or anyone who regularly makes statements via public platforms such as social media, PR, or print journalism. 

How to save on professional indemnity insurance

Professional indemnity insurance is important for many organisations, and while getting the protection you need is the priority, there are ways you can look to reduce your PI insurance quotes:

• Take your time over paperwork – when getting a professional indemnity insurance quote, you may be asked to complete a proposal form.  This will give the underwriter some details on your organisation.  Making a good first impression can help in their decision-making.   Tell them about any risk management procedures and safeguards you have in place, as this can reduce the risk in their eyes.
   
• Contact your insurance broker early and ask them to review your cover – organisations’ risks, insurers’ appetites, market conditions, and policies change.  Start the renewal conversation weeks before it’s due, and your broker can review your needs and compare their markets to find you the cover you need.

• Explain claims – explaining the circumstances of a claim and providing mitigating evidence and/or demonstrating steps you’ve taken to prevent a repeat can help keep premiums down. 

Like some more professional indemnity insurance help?

Professional indemnity insurance can be a complicated area of protection.   If you’d like to know how it can protect you and your business, get in touch and one of the Jensen Insurance Brokers team will contact you.