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Insurance for ICAS accountants

02/07/2014

When it comes to protecting your business, you can never be too careful. ICAS think so too. That's why they insist on ICAS insurance for all their chartered accountants.

Professional indemnity insurance (PI) to be more precise. It pays for a legal expert to defend you if one of your clients alleges you've made a mistake or been negligent.

It also covers any damages or compensation you're liable to pay unhappy clients. So, a business-saver on two fronts.

Here's what ICAS have to say about your cover.

ICAS insurance requirements

Although ICAS want you to have professional indemnity insurance, they don't specify a minimum level of cover. It's a difficult one to judge and there are no hard-and-fast rules.

We'd say at least 2.5 times your annual fee income is a good place to start. Your broker can advise you how much if you're unsure.

However much you get, your policy should be from an ICAS-approved insurer. We work with several ICAS participating insurers, so if you're looking to buy your accountant's insurance from us, you're in luck.

ICAS members who’ve stopped trading need run-off cover. This covers claims involving past work but not current or new work. ICAS don't specify how long your run-off cover should last but other accountancy bodies suggest a minimum of six years. We'd agree.

If your firm has employees, ICAS asks that each one is named on your policy. This means telling your broker or insurer each time you take on new staff. Don't remove past employees from the policy though – you still need cover in case claims arise for work they did before they left.

Risk management 

As well as having insurance for when things go wrong, ICAS wants you to reduce your chances of a claim in the first place. Seems sensible.

It recommends you assess your risk level at least annually, ideally to coincide with your policy renewal, but more frequently if you make major company changes.

Here are a few of its risk management suggestions:

  • Go through each client and contract, assessing the possibility of a claim, and its potential impact. Consider past work, as well as current contracts.
  • Consider the potential impact a claim could have on your client’s stakeholders.
  • Discuss any worries you have with your team. If they're serious, contact the Members Service Department at ICAS.
  • Evaluate client projects in terms of the nature of the work, and the amount of client co-operation required. Also consider the type of business your client undertakes and how credibly they operate.
  • Be aware of the current economic climate. Not just from your point of view but from your clients' too.

Damage control

If you recognise that a client has a higher than average potential risk of making a claim, ICAS suggests establishing a risk mitigation procedure. In particularly risky cases, consider whether it's worth retaining the client.

If you're unfortunate enough to have a claim, ICAS has a procedure for members to limit its damage. They ask that:

  • Partners and employees communicate about what's happened to identify what caused it.
  • Firms establish a procedure for notifying insurers of claims.
  • Members learn from experience. (Bit of a difficult one to quantify, this.)

Although it may seem that ICAS are being overly fussy, these are all pretty standard insurance requirements. Several other accounting bodies have similar guidelines.

You can call ICAS for more information on 0131 347 0100.

And for any questions on professional indemnity insurance for chartered accountants, feel free to give us a ring on 0345 222 5391.

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