Joining a professional body like the Institute of Chartered Accountants in England and Wales (ICAEW) is a smart move. It proves you have qualifications coming out of your ears, and that you're more than capable of doing a great job.
Of course, if the ICAEW is to represent quality accountants, they can't accept any old chancer.
So, as well as holding the right accounting qualifications, members engaged in public practice have to have ICAEW professional indemnity insurance (PI).
PI insurance ensures that, if a client thinks your mistake has cost them money, you don't have to pay for legal fees and compensation. It's the best way to protect your business from the consequences of unfortunate errors.
Beside which, you can’t join the ICAEW without it. Here's what they say about it.
More is more
Unfortunately, you can't just buy the cheapest cover you can find and be done with it. The ICAEW has some pretty specific rules about what your policy must include, how much you must have, and who you buy it from.
For ICAEW insurance, you have to use one of their approved insurers. Here's a full list of them. We only work with ICAEW approved insurers, and our policy wordings meet their minimum requirements. So, if you're a customer of ours, you can relax.
ICAEW insurance levels of cover
The ICAEW stipulates that members must have at least £1.5 million PI insurance. It's up to you whether you want this level of cover in the aggregate or for any one claim.
However, if you do decide to buy more than £1.5 million, it doesn't have to come from an ICAEW approved insurer. Likewise, the wording doesn't have to be compliant either.
If your firm's gross annual income is less than £600,000, you're exempt from the £1.5 million minimum stipulation. Instead, your level of cover must be equal to one and a half times your firm's gross annual income, with a minimum level of indemnity of £100,000.
But, the ICAEW does warn that less than £1.5 million might not be enough protection if there's a claim.
Licensed firms, or firms authorised by the FCA to conduct insurance mediation activities, must have at least €1,120,200 for any one claim and €1,680,300 in total. This is to comply with the EU's Insurance Mediation Directive regulations.
Finally, if your firm is an accredited probate firm, your minimum level of cover for probate work must be at least £500,000 for 'any one claim'.
Is that it?
Each year, firms have to complete a certificate of compliance to prove they hold the right PI insurance. This makes up part of your Practice Assurance annual return. Be warned: the ICEW checks with insurers and brokers that the information you supply is accurate. So make sure it is.
If, for whatever reason, you can't buy insurance from a participating insurer, or that meets these specifications, you're able to join something called the 'assigned risks pool'. By joining, the ICAEW is able to offer you some degree of insurance protection – it works a bit like a collective.
You must be able to prove your attempts to buy insurance from elsewhere were unsuccessful. The ICAEW will only cover you for claims made while you're in the risks pool. If a client alleges you've made a mistake, and it happened before you joined the pool, you're not protection.
You also have to sign an ICAEW contract stating you agree to pay their premium, and agree to an ICAEW review of your business. The maximum amount of time any business can spend in the assigned risks pool is 24 consecutive months.
Count on us
If you're in, or hoping to join, the ICAEW, we hope this has given you a better sense of your insurance obligations.
For ICAEW-specific advice, we recommend you visit their website, or get in touch with them on 01908 248 250.
If you have any questions about professional indemnity insurance for ICAEW accountants, feel free to give us a ring on 0345 222 5391.accountantsclaimsmanaging riskrules and regulations