Do Accountants Really Need Professional Indemnity Insurance?
It’s not easy running an SME in 2023. 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.
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.
Why should accountants buy cover?
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. 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.
4 times PI Insurance can prove invaluable for accountants
Here are four scenarios where PI Insurance has helped an SME accountant faced with a claim…
- Breach of contract
An accountancy firm fails to comply with HMRC filing deadlines resulting in penalties for the client.
- Poor financial advice
An accountant fails to warn a client that the transfer of shares prior to the sale of a business will trigger a CGT charge. A complex claim as the client may not have warned the accountant of their intentions.
- Failure to spot fraud
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.
- Technology misuse
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 to look for with PI cover
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.
Client requirements
Beyond regulatory hygiene, be clear about what matters most to your clients and how they operate. SMEs are not homogenous. Each one is different, so you need access to a range of products that can be tailored to your customers’ needs.
Convenience
Look for comprehensive products that are simple and quick to arrange. 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.
Quality
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.
Fast, reliable insurance from Aqueous
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.
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
