Interview with Robert Hartley (ACII)
In the following interview with Robert Hartley (ACII), we discuss professional indemnity insurance (also called professional liability insurance) and the value it can have for your business. Although PI cover is not required by law, it is often indispensable for professionals such as solicitors accountants and architects. Is professional indemnity something you should consider for your company? Find out from the video below.
Lucjan Zaborowski: Hello everyone, my name is Lucjan Zaborowski and today we will be talking about professional indemnity insurance: what is it and why you may need it for your business? Today, my guest is Robert Hartley, he is one of our experts on the subject. He is a product manager here at Simply Business. So, welcome to you Robert. Let’s get right to it. In simple terms, what is professional indemnity insurance?
Robert Hartley (Product Manager ACII): Professional indemnity insurance or PI insurance is insurance that protects you against claims from dissatisfied customers. So, if your advice, design or a service, results in financial loss to your customer, than you may be subject to a professional indemnity claim. But, it is also important to remember that even if you have not done anything wrong, some clients will be unhappy or disgruntled or even just want to get something out of you. In which case, you have to pay the defence costs to protect yourself and PI will also pick up those defence costs.
Lucjan: Is professional indemnity insurance actually required by law?
Robert: Not by law exactly, but you have certain regulatory bodies, such as the body that regulates solicitors: they require that all solicitors in the UK have PI and the same goes for accountants and architects.
Lucjan: Does professional indemnity only cover for financial damage or physical damage as well?
Robert: Professional indemnity cover the financial damage to your clients from the service or advice that you have given that was negligent. The physical damage will be covered by public liability. So, if the customer trips over a bag and injures himself that would be covered by public liability insurance.
Lucjan: What kind of professionals are commonly associated with having this kind of insurance? Could you list some of them?
Robert: For PI, as I said, there are some that will have to have it: the regulator or the institute that provides certification will demand it like: solicitors, accountants and architects. But, then you also find that customers we have like IT contractors, even though it is not required by any regulator, their customers require it of them and it becomes a necessity.
Lucjan: So let’s say I am an IT technician and instead of setting up a computer, or actually, instead of advising a customer on setting up a computer, I do it myself manually. So does this make a difference for my liability from professional indemnity point of view?
Robert: Yes, it would make a difference. If you are, literally, brought in to install the machine and you are not giving any advice on the type of machine they require or the software or you haven’t designed any of the software: you literally plug and play, than that does not require professional indemnity. You would probably require public liability, because, for instance, you have you’re a tool bag lying around, you customer trips over and hurts himself or damages something – that would be public liability. But in a sense, just plugging something in and constructing it, that doesn’t require professional indemnity. Anytime you have an element of advice and you tell them: you definitely need this machine, this machine will manage your website hosting and suddenly your website crashes, you failed on your advice and that is when professional indemnity kicks in.
Lucjan: Does it make a difference if a person works from home? I would think not, because the location doesn’t really matter, you are still giving advice, correct?
Robert: Absolutely, that is right. Particularly with IT developers: you could actually be working for somebody in Brazil, or America, or Australia giving advice and you would still require professional indemnity insurance.
Lucjan: So what does the level of professional indemnity insurance actually depend on, would you say?
Robert: A lot of the time it is driven by the regulator or the clients of the contractor and you find that, typically, a million pounds is, sort of, the request. But, if you don’t have to have it and you buy it to protect yourself because you have these exposures and you’re not demanded by the regulator, the key thing is to think about what the financial loss could be to your customer from the advice you are giving. So, you may think “it may be just a few thousand pounds”, but we start at £50,000 as the low level limit so that may meet your need. It is very hard to say without knowing your exact scenario. But, it could be that you are working on some projects that require five or ten million pounds, in which case you can buy up to those limits as well.
Lucjan: On average, would you say the professional indemnity cover is more or less expensive than public liability insurance?
Robert: Well, for professionals, it would be professional indemnity. Professionals are, not exposing themselves as much to public liability claims. However, it is important to still be covered against those. A lot of contractors, for instance, like IT contractor is at risk from PL and is more likely to have a bag lying around: as opposed to construction sites where PL risk is much greater.
Lucjan: What are some of the common claims that you see for professional indemnity insurance? What are people claiming for?
Robert: Well, they are mostly from the people who require it. So, for example, accountants, who give bad tax advice. I have seen an architect who designed a bridge in the US and it collapsed, because they haven’t accounted for the weight of the vehicles going over. That was a very expensive claim. And, anything from a small claim against an IT contractor, that we then, through out because there was no real basis for the loss.
Lucjan: Well, great! We covered quite a lot in this quick session so I really appreciate we had this time and thank you Robert for joining us. That’s it for now. Thank you for listening in. Hopefully, this has been helpful. Tune in for more videos from Simply Business. Thank you.
Find out more on our professional indemnity insurance FAQ