Professional indemnity insurance: business must-have

Some public practitioners may view professional indemnity insurance as a box-ticking exercise – something that’s necessary, but that doesn’t merit much regular thought or attention. The paperwork is signed and gathers dust until a crisis hits.

However, by transforming the relationship from transactional to a partnership, accounting firms can reap many benefits, not only when facing a professional indemnity claim, but also in the course of running a busy public practice.

Establishing such a relationship starts with finding the right insurer or broker, ideally one with expertise in the accounting sector, says Drew Fenton CPA at Fenton Green.

“Professional indemnity insurance is not a standard commodity. There are different service and knowledge levels that practices should be trying to access,” he says.

“It’s not a price-driven decision. Insurance is complex, and you have to get the right policy to fit your circumstances.”

Prevention better than cure

A knowledgeable insurance partner can support practices in many ways.

To begin with, they can keep practitioners up to date with the latest trends in the professional indemnity sector – offering insight into how current events might impact their business, and the measures they can take to safeguard themselves from emerging threats. 

“For example, we’re going to be looking at a raft of insolvencies going forward, which we’re already seeing in the building industry,” Fenton says.

“If you have a client that is in financial difficulty, it is an increased risk factor for your practice, because if the business fails, a receiver manager or liquidator will be trawling through your work, looking for an error to try and recover some money.”

Alongside external threats, an insurance partner will encourage practices to manage internal exposures. This might include undertaking reviews of client relationships, or services provided. 

Likewise, insurers will recommend practices regularly check in with employees and partners.

Prioritising the mental wellbeing of staff has become particularly important since the onset of the pandemic, when demanding workloads, changed working conditions, lack of holidays and various other factors may have taken their toll – impacting employees’ work, and consequently leaving businesses vulnerable to claims.

Peace of mind when claims occur

Of course, if a claim does arise, your insurance partner will position you in the best possible way to address it.

An insurance provider that already has a good understanding of your profession and business model will be well placed to advise you on what to do; a broker, meanwhile, will act on your behalf, allowing you to focus on your core business.

On the flipside, managing a professional indemnity claim without the support of an insurance partner can be highly stressful, due to the inevitable loss of focus it creates within the practice. 

“It’s a big distraction, so the best thing that can happen is for the matter to be resolved quickly – get it done, get it dusted and the practice moves on,” Fenton says.

With the world becoming increasingly complex – and certainly more litigious – Fenton urges accounting firms to touch base with their insurance partner at least annually, to make sure they’re aware of the latest professional risks, and that their policy is still appropriate for their needs. 

He adds, “Don’t just wait for the bill; ring them up and ask what’s happening in the professional indemnity market and what the claim trends are,” he suggests.

“Tap into their wealth of knowledge.”

Find out more about professional indemnity insurance from QBE Fenton Green.