Simply Business Professional Indemnity Insurance UK: Who Needs It

What professional indemnity insurance covers

Professional indemnity insurance covers the cost of compensation and legal defence where a client alleges they have suffered financial loss because of a professional's negligence, error, omission or breach of duty. Typical triggers include incorrect advice, a flawed design, a missed deadline that causes loss, or a breach of professional confidentiality. The cover focuses on financial harm rather than the physical injury or property damage addressed by public liability.

When arranged through Simply Business, the cover is placed with an underwriter on the broker's panel, and the customer selects an indemnity limit suited to the size of the engagements they handle. The limit is often set by reference to the value of contracts and the potential loss a single error could cause. As with the broker's other products, the underwriting insurer carries the risk and decides claims, while Simply Business handles arrangement and administration.

Who typically needs professional indemnity

Professional indemnity is most relevant to businesses that provide advice, expertise, designs or specialist services. Consultants, accountants, architects, engineers, IT contractors, marketing professionals, surveyors and designers are common examples. For some regulated professions, holding professional indemnity to a defined minimum is a condition of practising, set by the relevant professional or regulatory body rather than by the insurer or broker.

Even where it is not mandatory, the cover is frequently required by client contracts, particularly for public-sector work and larger commercial engagements. A client may stipulate a minimum indemnity limit before awarding work. Businesses should check both their professional body's rules and their client contracts to establish the level they need, as the responsibility for choosing an adequate limit rests with the policyholder.

• Commonly need it: consultants, accountants, architects, engineers, designers.
• Mandatory for some: certain regulated professions set by their professional body.
• Contractual for many: clients often require a minimum indemnity limit.

The claims-made basis explained

Professional indemnity is usually written on a claims-made basis, which is a defining feature buyers must understand. Under this basis, the policy that responds to a claim is the one in force at the date the claim is made or notified, not the policy in force when the work was carried out. This is different from many other insurances, which respond based on when the incident occurred.

The practical consequence is that continuous cover matters. If a policy lapses, claims relating to past work made after the lapse may not be covered, even if the work was done while a policy was in place. When a business stops trading or retires, run-off cover can be arranged to continue protection for past work during the period that claims can still arise. Allowing cover to fall away without run-off can leave historic engagements exposed.

What professional indemnity does not cover

The cover does not extend to physical injury or property damage claims, which fall to public liability, nor to injury suffered by employees, which falls to employers liability. Exclusions are set by the underwriter and stated in the wording, and commonly include dishonest or fraudulent acts, known circumstances that existed before the policy started, and liabilities assumed under contract beyond ordinary professional duties. Reading the specific wording is essential, because the scope of cover varies between insurers and professions.

Claims, complaints and escalation

If a client alleges a problem, the policyholder should notify the matter promptly, even before a formal claim is made, because claims-made wordings often allow notification of circumstances that may give rise to a claim. Notification follows the route on the schedule, usually to the underwriting insurer. If a claim is declined, the complaints process must produce a final response within eight weeks, after which eligible micro-enterprises and individuals can escalate to the Financial Ombudsman Service free of charge. General insurance uphold rates have historically sat commonly in the 30 to 40 per cent range sector-wide per FOS data, and current figures are published at financial-ombudsman.org.uk.

Frequently asked questions

Who needs professional indemnity insurance?

It is most relevant to businesses providing advice, designs or specialist services, such as consultants, accountants, architects and IT contractors. It is mandatory for some regulated professions and contractually required for many others.

What does claims-made mean?

It means the policy that responds is the one in force when the claim is made or notified, not when the work was done. Continuous cover is therefore important to protect past work.

Do I need run-off cover?

If you stop trading or retire, run-off cover continues protection for past work during the period in which claims can still arise. Without it, historic engagements may be left exposed.

How is the indemnity limit decided?

The limit is usually set by reference to contract values, professional body rules and the potential loss a single error could cause. Choosing an adequate limit is the policyholder's responsibility.

Does professional indemnity cover injury or property damage?

No. Those claims fall under public liability or employers liability. Professional indemnity focuses on financial loss caused by professional advice or services.

What if my professional indemnity claim is refused?

Use the insurer or broker complaints process, which must give a final response within eight weeks. Eligible customers can then escalate to the Financial Ombudsman Service free of charge.