Clema Risk Solutions Clema Risk Solutions
Get a Quote
  • Business Insurance
    • Business Interruption Insurance
    • Business Owner’s Policy
    • Cargo Insurance
    • Commercial General Liability Insurance
    • Credit Insurance
    • Cyber Insurance
    • Directors and Officers Liability Insurance
    • Employee Compensation Insurance
    • Medical Malpractice Insurance
    • Product Liability Insurance
    • Professional Indemnity Insurance
    • Property Damage
    • Public Liability Insurance
  • Employee Benefits
    • Accidental Death and Dismemberment Insurance
    • Critical Illness Insurance
    • International Health Insurance
    • Term Life Insurance
    • Travel Insurance
  • Industry Solutions
    • Asset Management and Funds Insurance
    • Online Seller’s Insurance
    • Schools and Educational Institutions’ Insurance
    • Veterinary Clinic Insurance
  • About Us
  • Resources
  • Contact Us
  • Cargo Insurance
Clema Risk Solutions Clema Risk Solutions
  • Business Insurance
    • Business Interruption Insurance
    • Business Owner’s Policy
    • Cargo Insurance
    • Commercial General Liability Insurance
    • Cyber Insurance
    • Directors and Officers Liability Insurance
    • Employee’s Compensation Insurance
    • Medical Malpractice Insurance
    • Product Liability Insurance
    • Professional Indemnity Insurance
    • Property Damage
    • Public Liability Insurance
  • Employee Benefits
    • Accidental Death and Dismemberment Insurance
    • Critical Illness Insurance
    • International Health Insurance
    • Term Life Insurance
    • Travel Insurance
  • Industry Solutions
    • Asset Management and Funds Insurance
    • Online Seller’s Insurance
    • Schools and Educational Institutions’ Insurance
    • Veterinary Clinic Insurance
  • About Us
  • Resources
  • Contact Us
  • Get a quote
Apr 16

8 important points to review when buying professional indemnity insurance

Professional indemnity (“PI”) insurance (also called Error and Omission insurance) is to cover the professional persons. It protects them against legal liability to pay damages to persons who have sustained financial loss arising from their own professional negligence or that of their employees, in the conduct of business.  Nature of the professional indemnity insurance claims is that they can raise many years after work was performed (standard limit is usually 6 years). This long-tail liability claim brings additional complexity in underwriting this risk and it is important to avoid some mistakes to be properly covered. Considering the nature of the risks, it is not surprising to see huge difference in pricing between different insurers. It may come from insurer’s risk appetite but most likely due to differences in policy wording and/or extensions. Here are below 8 important points to review when buying professional indemnity insurance policy:

Disclosing professional activities

You need to clearly state all professional activities that your company is performing, clearly and specifically to avoid misunderstanding. Activities your company was performing before but no longer does (and no more income resulting from this activity) should also be listed as there is a risk of claim resulting from this activity, even few years later, that won’t be covered if it wasn’t mentioned in your contract.

Liability limits

The annual limit of your policy may include costs or exclude them. Main costs under PI is legal costs, and many contracts will set limitation much lower than annual limit for those costs. Keep in mind that PI claim may not result in indemnity payable, but you will have to involve legal fees to protect your business. The fees can quickly add up, affecting your company cashflow. It is therefore wise to make sure the annual sum insured is inclusive of costs

Excess

Excess is the part payable by you before the coverage kicks in. It is often that PI policies are negotiated with high excess as it will reduce the premium significantly. However, keep in mind that many policies may include that you to pay excess as soon as costs are involved. If excess does not apply on costs, you will have to pay the excess part only at the settlement of the claim.

Retroactive date

Retroactive date is key to define which past work will be covered by the ongoing policy. If company buy PI insurance for the first time, it is most likely that coverage will start at inception date of policy and no retroactive date will be offered. It is important however to have no break in cover otherwise the company will be exposed to past work claim and the day insured decides to buy this policy again, insurance company won’t offer them retroactive date coverage. So even if a company has low level of activity at some point, it is important to make sure that the policy is renewed every year without break in cover.

Change of business structure

If your company has been sold, acquire or merged with another entity, it is important to update your policy and keep all entities, even previous entity names that no longer exist, under the policy so liability arising from that entity will still be covered.

Policy termination

Policies may include a cancellation clause and be terminated in middle of year and premium refunded on pro-rate basis. But the day the policy is stopped, all future claims won’t be covered, and it will expose you to liability risks even if business is no longer operational. To avoid this risk, it is important to maintain the policy longer or negotiate a “run-off” period.

Bodily injury and property damages exclusion.

Many PI policy will exclude bodily damages and property damages. This risk is mostly related to public liability claims, but it could also be related to professional services rendered. This is key to cover those risks for some activities like construction. Indeed, an engineers or architect designing a new machine or building can be sued following property damages or bodily injury resulting from faulty design or negligence. Without this extension clause, they won’t be properly covered.

Consequential loss exclusion

This is a usual exclusion in PI policy. It is meant to exclude all consequential loss. This exclusion may end up being very tricky and insurers are not always very clear with the implication of such clause. In the example mentioned above of a building collapsing following miscalculation of weight bearing capacity, the insurer will only cover the direct loss. Hard to tell in that example what the direct and non-direct losses are, and you will most likely be ending up non cover at all.

There are many pitfalls with professional indemnity insurance policy and comparing those policies isn’t an easy task. Often purchasing decision is made only on sole aspect of price as this policy is bought at the request of a client to win a contract. Since these clauses will not appear in your policy certificate, it won’t affect the final decision of your client if they are not included. But understanding your actual liability and limitations of your policy are key to mitigate your company risks. Make sure your insurance intermediary is knowledgeable enough to advice you properly.

For any request, please contact our team in China, Hong Kong and Singapore and we will be advise you accordingly.

  • Facebook
  • Twitter
  • Tumblr
  • Pinterest
  • Google+
  • LinkedIn
  • E-Mail

Comments are closed.

Recent posts

  • The 3 levels of liability insurance for technology companies
  • Can I insure my cryptocurrencies?
  • How do I calculate the value of my contents and stocks for my business insurance in Hong Kong?
  • Does your employees’ compensation insurance covers your company when your employees are working from home?
  • Do Startups need business insurance?

Categories

  • Business Insurance (42)
  • Business insurance package (3)
  • Business Interruption (3)
  • Business Owner's Policy (2)
  • Credit insurance (1)
  • Cyber Insurance (5)
  • Directors and Officers Liability Insurance (3)
  • Employee Benefits (6)
  • Employer's Liability (4)
  • Health Insurance (2)
  • Marine Cargo Insurance (1)
  • Online Sellers Insurance (2)
  • Product Liability (4)
  • Professional Indemnity (6)
  • Property damage Insurance (1)
  • Public Liability (5)
  • Service Insurance (2)
  • Term Life Insurance (2)
  • Travel Insurance (1)
  • Uncategorized (1)
  • Business Insurance
  • Employee Benefits
  • About Us
  • Resources
  • Manage your Policy
  • Contact Us
  • Privacy Policy

Subscribe to our newsletter

Offices

Singapore
883 North Bridge road,
#0604 Softbank,
Singapore 198785
T: +65.6493.2428
hello@clema-rs.com
www.clema-rs.com

Shanghai
Room 608, No.1900 Tian Shan Road, Changning District, Shanghai,China
T: +86.21.3251.5535
hello@clema-rs.com
www.clema-rs.cn

 

Hong Kong
99 Hennessy Road
Bayfield Building, Room 2301, 23F
Wanchai HK
T: +852.5508.8017
hello.hk@clema-rs.com
www.clema-rs.com.hk

France
4 Rue des Orphelines
77160 Provins,
France
hello@clema-rs.com

Linkedin
Made by Them You & Me
Thank you

Thank you for your interest in Clema Risk Solutions. We will respond to your inquiry in the next 24hrs.

What are you looking for?

Business Insurance OR  Employee benefits

Enter your details to proceed

 

Enter your details to proceed

 

 

Enter your details to proceed

 

You are a resident in:

Singapore

You need insurance for

An Individual OR  A Group