Proposed Changes to Professional Indemnity Insurance
While professional indemnity insurance isn’t a legal requirement in the UK, it is highly recommended for any business that offers advice, guidance, or recommendations to their customers or client base. This includes everyone from retail staff to builders. For some industries, such as law and finance, professional indemnity insurance is often required for membership by governing or regulatory bodies, and professional indemnity insurance is also becoming a popular request from clients for specific projects.
For many businesses, there is a great deal of flexibility when buying professional indemnity insurance. With the help of online comparison sites, it’s quick and simple to compare professional indemnity insurance policies and select a policy that ticks all the boxes and offers comprehensive cover for an affordable price. Unfortunately, for businesses within certain industries, things aren’t quite as straightforward, especially for those in the legal sector who are required to obtain specific cover.
Solicitors working in the United Kingdom are required by regulatory bodies to obtain between £2 million and £3 million in professional indemnity insurance cover. Sole practitioners and partnerships are required to have £2 million minimum coverage, whereas limited companies are required to have £3 million. There is a great amount of debate about whether this level of cover is really needed, and in 2014 it was proposed that the minimum cover for solicitors was reduced from £2 million to £500,000.
This proposal was ultimately rejected, but there are plans to once again challenge these regulations, based on 10 years of claim data which demonstrate that such high levels of cover are not required.
If these professional indemnity insurances changes go ahead, we can reasonably expect:
- Greater flexibility for businesses as the market place opens up. Businesses would no longer be restricted to selected professional indemnity insurance policies or premiums.
- More tailored insurance products. ‘This would maximise opportunities for firms to negotiate limits most appropriate to their business activities’, says the Solicitors Regulation Authority.
- Cost savings. By removing limitations for these businesses, there are more opportunities to reduce outgoings and reallocate funds to further business growth and development.
Who Will Be Affected?
Most businesses will not be affected by the proposed changes to professional indemnity insurance. The legal sector is anticipated to be directly affected should the proposal be given the go ahead, but those businesses in alternative sectors who are governed by a regulatory body, such as architects, should also be prepared for changes in the near future. These changes are ultimately designed to offer more flexibility to businesses, giving them more control over how they choose to protect their brand.