The What and Why of Professional Indemnity
What is professional indemnity insurance?
ITIC provides professional indemnity (PI) insurance for claims brought against you for losses suffered by your customers as a result of your negligence or error and omission.
A party who is acting as a professional, providing advice, information, designs and consultancy services owes a duty of care to their customers/principals. The standard of duty of care is the provision of “reasonable skill and care”. If a company falls below the standard and causes a loss, they maybe viewed as being negligent and maybe liable for any losses incurred. The world is becoming more and more litigious and as such when a mistake occurs someone has to compensate the party who has suffered a loss.
Who needs Professional indemnity insurance?
Any company providing services, advice, design, consultancy should be covered by professional indemnity insurance. It is difficult for many professionals to imagine a claim being made against them but ITIC’s experience confirms that mistakes frequently occur. Should your error or omission cause a loss to your customer or to a third party then you could be held responsible. You could even be sued when you have done nothing wrong simply because you act as an agent for somebody else. Defending such claims costs time and money. ITIC will handle them on your behalf.
How does Professional Indemnity Insurance work?
Professional Indemnity insurance operates on a 'claims made' basis. This means that claims need to be made during the period of the policy, not when the alleged incident occurs. In view of the claims made nature of the insurance, it is important to maintain continuity of cover and insurer. ITIC has seen claims being made against professionals many years after services are complete and when the assured has relied on their insurance to assist.
The insurance is there to protect you, not your principals/customers.
Does ITIC only cover the loss?
The cover provided by ITIC is for professional indemnity, together with legal costs cover. You can additionally purchase a debt collection service, directors’ and officers’ (D & O) insurance, commission insurance, loss of management fee insurance, cash in transit and money insurance; ITIC also provides advice on loss prevention, legal issues and local support from a worldwide network of correspondents.
What will it cost?
The premium to be paid is calculated on an individual company basis. Factors which will be taken into account include the number of staff you employ; the amount and type of work you do; where in the world and with whom you do your business and the amount of cover you require. A variety of premium and cover options can be offered.
What is the security?
ITIC and its predecessors have been insuring these risks for more than 85 years. Financial security comes from strong reserves and sound reinsurance.