What is professional indemnity (PI) insurance?
Professional indemnity insurance (PII) is liability insurance that covers you when a client or third party claims to have suffered a loss due to professional negligence.
Do I need PI insurance?
Any AAT member providing self-employed accountancy or bookkeeping services to clients, as a sole practitioner or through multiple firms, must ensure they obtain PII cover for each entity that meets the requirements of this policy.
What happens if I fail to provide evidence of a valid PI certificate and insurance policy?
Any failure by an AAT member to cooperate with AAT’s monitoring arrangements concerning PI may lead to disciplinary action.
What happens if I have no PI cover in the event of a negligence claim?
If you have inadequate or no PI insurance, in the event of a claim, any legal costs and any award to the claimant for professional negligence arising from what is deemed to be your professional negligence will be entirely your liability. These can run from hundreds of thousands of pounds.
Once I have bought PI cover, can I simply rely on the insurer automatically renewing my cover each year?
A licensed member must submit a licence annual declaration each year confirming they have adequate PI cover in place. You must check prior to renewal that neither your position nor the terms of policy have changed since you last renewed your cover. If they have, you must check you still have the right cover.
I am leaving the profession or retiring soon. Will I still need to buy PI insurance?
All licensed members ceasing to practise must make arrangements to maintain the existence of adequate PII cover for a recommended period of six years from the date of cessation. You should check with your insurance provider for further advice, because claims can still be made at a later date for work undertaken during the period of engagement with a former client.
Do I have any other obligations beyond the purchase of appropriate PI cover?
As a licensed member of the AAT, you must submit a licence annual declaration each year confirming you have PII in place in accordance with the provisions of this policy.
Is a one-off purchase of PI cover sufficient if I work for more than one firm?
Any licensed member providing self-employed accountancy or bookkeeping services to clients through multiple firms must ensure they obtain PII cover for each entity that meets the requirements of this policy.
What are the penalties for not holding appropriate PI insurance?
You are liable to lose your membership rendering you unable to practice as an AAT member. A licensed member must provide AAT your firm’s PII certificate and insurance policy. Any failure by a member to cooperate with AAT’s monitoring arrangements in this regard may lead to action in accordance with the association’s disciplinary regulations or licensing regulations.
There appear to be many insurers offering PI cover. What can I do to make sure I buy the right cover for myself?
The first rule of buying any insurance cover is to consult an insurance broker for advice and guidance as to the correct policy. They may charge a fee but it is worth paying for peace of mind.
Written by Bill Lumley (Head of Marketing - TRM)