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Professional Indemnity Insurance for Small Accountancy Practices and Sole Practitioners

Whether your firm is a new practice or well established, there are many risk factors you can face. Here we look at some of the risks you may face as your practice grows and evolves over the years ahead.

1. Live long and prosper

Good practice management is a key to avoiding potential claims. It goes without saying that you should follow ICAEW’s guidelines, but here are a few more pointers.

• Have a good alternate - someone who has the skills, care and diligence to look after your affairs during a protracted period of absence.
• Review your terms of business regularly – and be sure to use them.
• Beware of conflicts of interest in managing family or group businesses.
• Having access to a specialist tax helpline is essential. Access to a legal expenses helpline is also useful.

2. Growing pains

As your business grows it can add to the challenges you face running your business:

• Taking on staff? Be sure to take written references and provide adequate levels of supervision. Insurers are keen to avoid a high ratio of unqualified staff versus qualified practitioners.
• Taking on another firm? Remember that you might also take on liabilities from that firm, their predecessors and previous partners. They might have been involved in higher risk work, and any claims which come to light after the takeover fall on you unless you’ve made other arrangements.
• Outside appointments – directorships, trusteeships and the like - are covered as standard in most cases. However not all activities are automatically covered and it pays to review your exposure and whether you or the entity needs more specific protection.
• Review your cover limits. Although ICAEW mandates minimum limits, more complex work might increase your exposure. 
• A motivated and happy workforce is more productive and businesses who offer more can reap the rewards. An employee benefits management system isn’t just for corporate giants – and it doesn’t have to cost the earth to administer.

3. New tricks

Expanding into new areas? Over time you might find your clients require a wider range of services. That’s fine, though there are a few things to consider:

• If in doubt, don’t! If there are work areas in which you work infrequently or haven’t provided services before, do take stock and consider if you are best placed to offer it. It might be that using a specialist consultant or referring the work is better for your client.
• If you do some types of work on an occasional basis you might find yourself paying for it for some time. There are areas which are higher risk – for example insolvency, mergers and acquisitions, corporate finance where insurers may charge higher premiums. Specialist taxation work (that is, beyond standard audit, accountancy and compliance taxation) such as taxation consultancy and tax mitigation falls into this category too.
• DPB license. This enables you to support your clients with other financial matters, particularly investments, pensions and fund management. You’ll need higher cover limits – over £1 million, and some insurers will not provide cover for firms. Those that do commonly charge higher premiums, increase policy excesses and restrict/aggregate cover limits.
• Similarly, you may consider taking on probate and estate work, which are services associated with a higher risk of negligence claims being made.

4. Just when you thought it was safe…

• You’ll have read about GDPR and cyber-security risks such as phishing and scams. The biggest vulnerability can come in the unlikeliest of places, such as email. Having appropriate systems and protections – and specialist insurance – are key.
• Economic or trade sanctions may prohibit the provision of some services. Screening against watch-lists for countries, companies, people or industries becomes important to comply with criminal and civil laws. Be aware that your insurers might be prohibited from responding to claims involving sanctioned regimes.

5. When things go wrong

In any business there can be mistakes, but what should you do when things go wrong?

• Your overriding need is to protect your reputation, promote the goodwill of your business and to mitigate, minimise or avert any allegation, claim or loss.
• There are two key aspects when dealing with a claim; the notification process and any relevant special conditions. Swift professional guidance is invaluable to steer you through the process.

6. We’ve got to get out of this place…

Thinking of selling up, or planning your retirement?

• When your firm stops practicing you have continuing liabilities. Your professional indemnity insurance is arranged on a ‘claims made’ basis. Cover is triggered when a claim is made or a circumstance arises that might give rise to a claim. It does not arise when the negligent act or omission occurs.
• If another firm is acquiring the business they may take on those continuing liabilities – or may not and instead leave them with you.
• If no-one else is insuring them, ICAEW requires you to buy ‘run off’ cover. Buying a long period policy when your firm ceases trading can give you peace of mind.

If you would like to discuss any of the above or your Professional Indemnity Insurance requirements in more detail, please contact Bluefin Professions on 0330 1734 102.

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