Questions
& Answers
What do Insurers look for?
First and foremost, qualifications or experience. If an 'Accountant' is unqualified then insurers will want to see a CV, normally demonstrating at least five years' practical experience, maybe more depending on the services offered.
Main Bodies with PI Rules
The Institute of Chartered Accountants in England & Wales (ICAEW)
The Institute of Chartered Accountants of Scotland (ICAS)
The Institute of Chartered Accountants in Ireland (ICAI)
The Association of Chartered Certified Accountants (ACCA)
The Chartered Institute of Taxation (CIOT)
The Association of Accounting Technicians (AAT)
The main features of their various rules are:
ICA Required Limit of Indemnity
Two and a half times the firm's gross fee income for past financial year, subject to a minimum of £100,000 for a sole practitioner or £100,000 in any other case and a maximum of £1,500,000 (of course firms can be recommended to buy much more!).
Main features of rules
Cover to be provided via an insurer from the 'List of participating Insurers' published each year by the
Institute
Cover must conform to the Institute 'approved wording' - a 'difference in conditions' clause must be included where cover
differs
Retroactive cover of 6 years or establishment date of practice must be
provided
An 'Assigned risk pool' exists for those practices unable to obtain
cover
Run-off cover following cessation must be maintained for 2 years, but it is recommended that run-off is continued for 6
years
ACCA Required Limit of Indemnity
Fee income less/equal to £200,000 - the greater of two and a half times the firm's total income for past financial year and 25 times largest fee paid in past financial year, subject to a minimum of
£50,000
Fee income £200,000-£700,000 - the greater of the aggregate of £300,000 and the firm's total income for past financial year and 25 times largest fee paid in past financial
year
Fee income over £700,000 - the greater of £1,000,000 and 25 times the largest fee paid in past financial
year
Main features of rules
Cover to be provided by 'reputable' (DTI approved) insurers
Cover to be on a 'civil liability' basis for each and every
claim
Fidelity guarantee cover must be included for partners, directors and
employees
Run-off cover following cessation of practice must be maintained for 6
years
CIOT Required Limit of Indemnity
The greater of two and a half times the firm's gross fee income for its last financial year or 25 times largest fee raised in past financial year subject to a minimum of £100,000 for a sole practitioner or £200,000 in any other case and a maximum of £1,000,000.
Main features of rules
Cover to be provided by any EU insurers authorised by law
Cover to be for all 'civil liability' incurred in connection with the conduct of the
business
Fidelity guarantee cover is 'recommended' but not compulsory
Run-off cover following cessation must be maintained for at least 6
years
Firms regulated by certain other professional bodies may be exempt from the CIOT PI
requirements
The Usual Cover
Usually the limit of indemnity will be 'any one claim' with legal costs in addition. The excess will not normally apply to insurers' costs and expenses. Being on a civil liability basis, unless specifically excluded (which is unusual) cover would include negligence, liability for dishonesty, liability for lost documents, libel and slander, breach of warranty of authority, etc.
Where a miscellaneous policy is offered, the same rules as for miscellaneous business apply. A difference in conditions clause must be present for Chartered Accountants; this is required to demonstrate that the policy offers at least the same cover as the minimum standard required. Cover operates for all the activities that would be expected of an Accountant, including personal appointments, such as directorships, as liquidator, as trustee, but only in respect of an Accountant's usual services.
The Usual Exclusions
Civil liability policies demand careful attention to exclusions so that non-PI exposures are not inadvertently covered. Typically, policies will exclude:
Death or bodily injury
Loss or damage to physical property (but fidelity and loss of documents are
covered)
Punitive or exemplary damages (many policies have no geographical or jurisdiction
limitations)
North American offices
Liability to other insured's
Nuclear risks
Claims and circumstances known at inception of the cover
The Usual Extensions
Fidelity
Loss of documents
Costs of representation at tribunals
Useful Links
THE INSTITUTE OF CHARTERED ACCOUNTANTS IN ENGLAND & WALES
(ICAEW)
The Institute of Chartered Accountants in England & Wales is the largest professional accountancy body in Europe, with over 120,000
members
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF SCOTLAND
(ICAS)
The ICAS received its Royal Charter in 1854 and is the oldest professional body of accountants in the
world
ICAEW APPROVED INSURERS
LIST
THE ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS
(ACCA)
The ACCA is a professional body that represents Certified
Accountants
CHARTERED INSTITUTE OF TAXATION
(CIOT)
The CIOT is the senior professional body in the UK concerned solely with all aspects of
taxation
ASSOCIATION OF ACCOUNTING TECHNICIANS (AAT)
Formed in 1980. The AAT is the professional body for Accounting Technicians, with more than 100,000 Members and Students
worldwide
THE CHARTERED INSTITUTE OF MANAGEMENT ACCOUNTANTS
CIMA (an internationally recognised finance qualification for business) is the voice of over 74,000 students and 57,000 members in 156
countries
INSURANCE
GUIDE FOR PROTECTING SMALL BUSINESSES
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