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 to help you manage some of risks that often end up causing claims.
- 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.
As your business grows it can add to the challenges you face running your business:
- Taking on staff? Make sure you 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, its predecessors and previous partners. It 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 other similar position 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 that 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.
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 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, and 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 fall into this category too.
- Designated professions body license - this enables you to support your clients with other financial matters, particularly investments, pensions and fund management. You’ll need higher cover limits and some insurers will not provide insurance 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.
Just when you thought it was safe…
- You’ll have read about GDPR and cyber-fraud. The biggest vulnerability can come in the unlikeliest of places, such as email. Cyber crime is on the rise and becoming increasingly sophisticated – particularly during the pandemic. Having appropriate systems and protections – and specialist cyber 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.
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. If you’re aware of a mistake that has happened, contact your insurance broker or insurer immediately for advice.
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, it 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.