Frequently Asked Questions - Accountants' Professional Indemnity Insurance

Professional Indemnity insurance cover

What is Professional Indemnity?
Professional Indemnity insurance provides cover for claims made against the policyholder in relation to a negligent act, error or omission, or breach of professional duty in the conduct of their business.  It protects the policyholder from claims for compensation and provides cover for legal costs incurred in such a claim.

Do I need Professional Indemnity insurance?
Whilst Professional Indemnity insurance is generally considered to be an essential product for professionals, there is no legal requirement to carry it.  That said, many professional bodies (such as ICAEW) stipulate a compulsory requirement for their members to hold Professional Indemnity insurance, and may even specify the minimum terms and level of cover that their members may hold.

Does Professional Indemnity insurance cover work carried out prior to inception of my policy?
As standard, the Professional Indemnity insurance policy will only cover work which is carried out after the policy has incepted, however, it is possible to include "retroactive cover" for an additional premium.  You can buy retroactive cover even if you are taking out Professional Indemnity insurance for the first time.  If you include retroactive cover in your policy and pay the additional premium you will be covered for work you conducted prior to the policy inception date; if you do not include retroactive cover in your policy you will only be covered for work undertaken after the "retroactive date" (see below).

What is a "retroactive date"?
Professional Indemnity policies operate on a ‘claims made’ basis, which means that cover must be in place at the point where a policyholder is notified of a claim, not the point at which the work was carried out.  Some Professional Indemnity insurance policies will place restrictions in this respect by imposing a ‘retroactive date’ whereby no cover is provided for any work undertaken prior to the specified date, even if there is a policy in place at the time the claim is made.  If you choose to include retroactive cover (see above) your policy will be issued without a retroactive date and you will be insured for past work regardless of when it took place.

Where might my exposures lie?
Below is a list of hypothetical scenarios where a claim might be brought against an accountant, and which might be covered by a professional indemnity insurance policy.

In very simple terms, a claim could arise where you have made, or are alleged to have made, a negligent error, act or omission which results in the financial loss of a client.

  • Client purchased a company on the basis of accounts which had been approved by the accountant. The client proceeded with the purchase but subsequently discovered that the accounts did not show the true financial position of the company.
  • The accountant was negligent in auditing company accounts and failed to identify a major fraud.
  • The accountant advised a client regarding the transfer of funds to members of their family and as a result of following the accountant's advice the client became liable for additional Capital Gains Tax.
  • The accountant failed to meet the requirements of the Companies Act when dealing with the issue of shares for a client.
  • It was alleged that the accountant was negligent in the preparation of company accounts.
  • The accountant was engaged to carry out accountancy services and to give tax advice. As a result f negligence advice a client became liable for deferred tax payments plus interest and penalties.
  • The client alleged that the accountant failed to prepare accounts and tax returns on time.

Quotations

What information do I need to provide in order to obtain a quote from this website?

To obtain a quote you simply need to confirm:

  • your business activities
  • your annual turnover
  • the limit of indemnity you require 
  • whether you would like to cover work undertaken in the past (prior to inception)

You will also need to answer some simple questions so that we can determine whether you are eligible for our online product.  If you are unable to obtain a quote through the website for whatever reason we may be able to provide you with a bespoke quote via correspondence.

What limit of indemnity do I need on my Professional Indemnity insurance?
For many types of businesses there is no legal requirement to carry Professional Indemnity insurance and therefore there are no strict guideline as to what limit of indemnity must be carried.  In considering the level of cover you require you should take a view of the potential damages and legal costs for which your business could become liable.  We recommend that no insurance policy is taken out with a limit of less than £250,000.

Chartered accountants who are members of ICAEW or ACCA must comply with the regulations laid out by those professional bodies.  For example, the ICAEW specifies the following minimum limit of indemnity requirements:

  • Gross fee income of less than £600,000: two and a half times the firms' gross fee income, subject to a minimum of £100,000
  • Gross fee income of £600,000 or more: £1.5 million for any one claim and in total 

We are able to provide cover with limits of indemnity ranging from £100,000 up to £2,000,000 via our website.  If you require other levels of indemnity please contact us: telephone 01455 852112 or email insurance@qdosconsulting.com.
 
What if my turnover increases during the year?
If your turnover increases slightly during the period of insurance there is no need for you to notify us; all you need you to do is declare your latest updated turnover at renewal.  However, should your turnover increase significantly during the period of insurance it is always advisable to make insurers aware of this fact.  The insurer may require you to pay an additional premium, or will simply note their records.  If you are unsure as to what constitutes a marginal increase, we recommend that you email us the details so that we may inform the insurer and advise you accordingly.

How long does it take to get a quote?
You are able to obtain a "quick quote" from our website within seconds, without having to enter any information other than your business activity, annual turnover and the limit of indemnity you require.  To obtain a confirmed quote you will need to register for an account on our website and answer a few simple questions.  The entire process from start to finish can be completed in two minutes or less.

When does cover start?
If you are eligible for cover online your policy will start on the date you specify within the application questions, provided you have paid, or agreed to pay, the quoted premium.  As part of the application process you are asked to confirm the date on which you would like your cover to commence; this can be any day from the date of application up to 30 days into the future.

Can quotations be given over the phone?
We are able to provide a "quick quote" over the phone, however, you will need to visit the website to register for an account, complete the application questions and make payment.

My trade or business activity is not listed – can I still apply for cover?
We can only offer cover for selected business activities through our website.  If your trade or business activity is not listed it does not necessarily mean we will be unable to provide Professional Indemnity insurance to you.  If you undertake a business activity which is not listed online please feel free to contact us to discuss your requirements as we may be able to arrange cover for you on a bespoke basis.  Telephone 01455 852112 or email insurance@qdosconsulting.com.

Policy cover

Am I covered for work carried out abroad?
Our Professional Indemnity insurance policies typically provide cover for work carried out worldwide excluding USA and Canada.  Please check the policy summary and/or wording documents for confirmation.

Am I still covered if the mistake is made by an employee working for me?
The policy will cover negligent errors, acts or omissions committed by employees whilst undertaking work on behalf of the insured business, however, work sub-contracted out to another firm, associate or contractor will not be covered under your Professional Indemnity insurance and it recommended that you ensure they have their own cover in place.

Payment

How can I pay for my insurances?
You can pay online or over the phone by credit or debit card, or by cheque or BACS transfer on request.  Online and phone payments are transacted through Sagepay, a third-party payment service provider.  

Is it safe to enter my card details into your website?
When you make payment online you will enter your card details directly into Sagepay's system - we do not capture nor retain customer credit or debit card details on our own servers.  All communications between our website and Sagepay are encrypted using 128-bit SSL certificates and any messages sent to our server from Sagepay is signed using MD5 hashing to prevent tampering by unauthorised third parties.  All sensitive data held on Sagepay's systems is secured using internationally recognised 256-bit encyption.

Can I pay in instalments?
You can pay monthly, however, an additional administration fee of £12.00 will be charged.  The first month's payment will be collected from your credit or debit card and the remaining balance will be collected from your bank account via direct debit.

Policy documentation

Can I review the policy terms and conditions before I apply for cover?
Policy documentation can be found on our website for reference before you apply for cover.  Please visit [website details to be supplied when pages have been created] for further information regarding our Professional Indemnity product and links to sample policy documentation.

Will I receive my policy documents through the post?
We do not send policy documents by post.  Your policy documents will be issued automatically by the website when you make payment.  The documents will appear in your account on our website, and will also be sent to you by email.

When will I receive my policy documentation?
Your policy documents will be issued to your account on our website and by email automatically as soon as you have made payment.  If you pay online (either in full or by monthly instalments) your documents will be delivered instantly; if you pay by cheque or BACS transfer your documents will be made available as soon as we have received cleared funds into our bank account.

Adjustment/Cancellation

Can I change the limit of indemnity on my policy mid-term?
You can make changes to your policy at any time.  Please contact us if you would like to increase or decrease the limit of indemnity on your policy.  Telephone 01455 852112 or email insurance@qdosconsulting.com.

How do I cancel my Professional Indemnity policy?
You may cancel your policy at any time by providing a written request to us.  This request must be sent by email to insurance@qdosconsulting.com or by post to: Underwriting Department, Qdos Broker & Underwriting Services Limited, Qdos Court, Rossendale Road, Earl Shilton, Leicestershire, LE9 7LY.  Please note that as Professional Indemnity insurance is written on a 'claims made' basis, your cover will end as soon as your policy has been cancelled.

If I cancel my policy will I receive a refund?
If you cancel within the first 14 days of cover you will receive a full refund of the premium you paid.  If you cancel after the first 14 days of cover you will receive a pro-rata refund which will be calculated on the remaining, unexpired period of insurance.  It should be noted that no refund will be provided if you have made a claim against the policy within the current period of insurance.

What happens if I stop trading or retire?
It is important to be mindful of the fact that there can be a delay between an event and a subsequent claim, and with Professional Indemnity insurance you need to be covered both at the time of the event and when the claim is made.  If you plan to cancel your policy when you close your business or retire we recommend that you arrange “run-off” cover for a period of time afterwards to ensure that you are protected from such delayed claims.  We are unable to quote for "run-off" cover through our website so please contact us if you would like to arrange such cover.  Telephone 01455 852112 or email insurance@qdosconsulting.com.

General

Is your website secure?
All communications with our website are secured by 128-bit encryption.  We do not capture or store any of our customer's credit or debit card information on our server - our online payment transactions are processed by SagePay on their secure website.

What companies are involved in supplying this insurance cover?
Intermediary: Qdos Broker & Underwriting Services Limited.  A limited company registered in England and Wales No. 06012716.  Registered office: Qdos Court, Rossendale Road, Earl Shilton, Leicestershire, LE9 7LY. Authorised and regulated by the Financial Services Authority (Firm Reference Number: 460886).  An insurance intermediary given the authority to issue quotations and bind cover on behalf of the insurer.

Insurer: HCC International Insurance Company plc.  A limited company registered in England and Wales No. 01575839.  Registered office: Walsingham House, 35 Seething Lane, London, EC3N 4AH.  Authorised and regulated by the Financial Services Authority (Firm Reference Number: 202655).

What is Insurance Premium Tax (IPT)?
Insurance Premium Tax is calculated as a percentage of the total gross premium payable in respect of each insurance policy.  IPT is charged to the policyholder and collected by the insurer for payment to HM Revenue & Customs.  The current rate of IPT for most insurance policies, including Professional Indemnity insurance, is 6%.  Insurance premiums are not subject to VAT.

Which insurers do you use?
The Professional Indemnity insurance policies we provide through our website are underwritten by HCC International Insurance Company plc (see details above).  For policies arranged outside the website we may use alternative insurers; full information will be provided to you if this is the case.

Renewals

Do you send out renewal reminders?
Renewal reminders will be issued by our website automatically approximately 30 days prior to the expiry of your existing policy.  Action is required on your part in order to renew your policy; if you ignore our renewal reminders and take no action your cover will lapse on the expiry date of your policy.

How do I renew my policy?
Simply click the link provided in the renewal reminder email we send to your registered email address and follow the on-screen instructions.  You will be required to review the information you previously provided and update any details where necessary.  The system will provide a renewal quote and your updated policy documents will be issued when you have paid your renewal premium. 

Do I have to renew the policy?
You are not obliged to renew your Professional Indemnity insurance with us and you are free to renew cover with another insurer or broker if you wish without any need to notify us (unless you wish to cancel your policy mid-term). 

Claims

What happens if I have to make a claim under the Insurance policy?
You must notify the insurer as soon as possible, and in any event within 10 working days of the receipt, awareness or discovery of:

  • any claim made against you
  • any notice of intention to make a claim against you
  • any circumstance or state of affairs or event which might reasonably be expected to give rise to a claim against you
  • the discovery of reasonable cause for suspicion of dishonesty or fraud

You must not admit liability or settle any claim or incur any costs or expenses without the written consent of the insurer.  To enable the insurer to handle the claim successfully it is essential that you promptly provide all the information and evidence they request.

Claims against Professional Indemnity policies underwritten by HCC International Insurance Company plc are handled by HCC's own specialist claims underwriters.  HCC provide a bespoke service where each claim is allocated to a dedicated and experienced claims underwriter, meaning direct access to a decision maker for the policyholder.  HCC have a panel of solicitors and adjusters, and, whilst they are able to provide legal advice, they are also aware of the complexities in dealing with claims and handling sensitive issues.