Key takeaways
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Turnover, professional services, experience, contract management, jurisdiction, and claims history are all key factors insurers will consider
- Professional indemnity costs can vary significantly from business to business, typically ranging from a few hundred pounds to tens of thousands
Professional indemnity cost comparison
Premiums can start from £321 per annum for a £1 million limit for a low risk profile, but can cost £10,000+ for higher exposed risks
Each insurer will take a view on the amount of risk you pose and allocate a price, otherwise known as a premium.
"As an insurance broker, we can compare the cover offered and cost of professional indemnity protection suitable for your needs"
We work with wide range of PI insurers to meet your needs:
What factors impact your professional indemnity premiums?
Below we explore the key factors that impact insurer's professional indemnity premium calculations. Typically, this will depend upon what industry you work, services you offer to your clients, the fees earned, and your claims experience.
Turnover
The last reported turnover (or projected if a startup) is an important factor given it shows the amount services you provide to your clients. Obviously, the more work you undertake the increased exposure to errors, omissions, and subsequent claim for damages.
Additionally, insurers will typically want to understand the nature and size of your contracts - which provides an indication of future claims, with larger scale projects typically carrying increased premiums.
Professional services
What professional service you provide to your clients is a key rating factor because different services will have higher or lower degree of
professional risk of future claims. Some industries such as financial services are more prone to litigation and will carry significantly higher costs.
It is important to note that your Policy Schedule correctly reflects your business activities because if you provide professional services that are not associated then you could find yourself without cover.
Read more about Who needs Professional Indemnity Cover?
Experience
Your experience and professional qualifications will acts as an indicator of your ability to: 1) provide accurate advice or services; 2) match advice and services to the client's needs; 3) manage client expectations; 4) recognise and mitigate client dissatisfaction.
For startup businesses, it is recommend that the principals submit copies of their CV's or bio's to demonstrate they have sufficent knoweldge and experience within their industry sector.
Contract management
Contractual conditions provide the first line of defence against a compensation claim made against you. Therefore, insurers may require you maintain certain contractual conditions. Your premium and availability of cover can be impacted if your contracts do not maintain: (1) a description of services; (2) limitations of liability; and (3) a consequential loss exclusion.
Lack of standard contracts that mitigate your exposure and legal vetting can indicate a reduced level of risk management and appreciation for the liabilities being accepted.
Read more about Limiting your Liability under Contract
Law and jurisdiction
Most insurers will not provide cover for compensation claims under US law and jurisdiction unless you specifically negotiate the coverage extension.
If you contract with US clients, it is recommended you do so under UK law and jurisdiction to keep your insurance costs lower. If disputes under contract are agreed to be held in a US court this will need to be declared to your insurer and can have a significant impact on the premium, due the more litigious nature and high damages awarded.
Read more about Law and Jurisdiction vs Territorial Limits
Claim history
The number of years you have successfully traded without claims can mean a discount to your premium. While, claims severity or frequency, with a lack of remedial action can indicate a lack of quality risk management and systemic issues.
It is recommended that any cicumstances notifed, open or closed claims are described in detail. This will mean providing a detailed description of the events that took place, what remedial action was taken to stop a recoccurance, identifying whether the claim is still open, how much has been paid to date, and what is the current reserve.
Benchmarked PII costs:
Small achitect (turnover £50,000) pays £425 annually for £250k PII
Software provider (turnover £1.5m) pays £3,200 annually for £2m PII
Tax accountant (turnover £4.5m) annually pays £45,000 for £5m PII
How to secure the best professional indemnity insurance quotes?
Information that identifies how your business represents a better than your industry peers can increase the availability of cover and reduce your cost. Insurers will consider discounts where evidence of compliance procedures, risks assessments and/or complaints register demonstrate your risk averse nature and high level of due diligence.
Why should we regularly compare cover?
There are only a handful of insurers that provide their solutions directly to the customer on a B2C basis. The vast majority of insurers will only offer their products through licenced intermediaries or brokers.
Cover and premium rates continue to change, so does your business and its insurance needs. It's prudent to compare quotes to ensure you continue to buy the most appropriate and cost-effective protection.
How to obtain competitive quotes?
Representation - to access the wholesale market you'll need to use an professional indemnity insurance broker. We are experts that can help you decide what type and level of cover you need, and recommend a suitable policy that meets your needs.
Right approach - quotes can be provided on a '
Statement of Fact' basis, or we will ask you to complete a
proposal form depending upon the industry you work and the size of your business.
Correct disclosures - all statements disclosed, statement of facts, should be full, true and accurate and given after undertaking a reasonable search. Deliberate or reckless failures to present your application fairly could mean part or all of your claim is declined.
Business activites - all PI policies will refer to a definition of professional service. It's important this definition is broad enough to capture your activities and sufficient information has been disclosed to ensure you are covered.
Terms and conditions - cover offered from the market can vary - the triggers of a policy, the insuring clauses, definitions, conditions and exclusions can be different. Unless you are an expert it can be hard to distinguish between the different policies.
Rated security - the insurers reputation for paying claims is an important consideration. If you need to rely on your policy, you don't want the uncertainty that cover hasn't been granted due to the insurer's insolvency.
