Within any profession in which a business is providing advice or a service to a client, it is highly recommended that this type of professional should obtain professional indemnity insurance. Accountancy is one of those professions, and we shall discuss within this article why exactly accountants require professional indemnity insurance, what a policy can protect them from, and what other types of insurance they may also require.
What Is Professional Indemnity Insurance?
Professional Indemnity Insurance protects you and your business against any allegations that a customer may make that your business has provided inadequate advice, services or designs. It also covers legal expenses in defending the claim as well as any compensation required to fix the problem. Professional Indemnity insurance covers a range of scenarios, including:
- Professional negligence
- Loss of documents or data
- Unintentional breach of copyright or confidentiality
- Defamation and libel
- Loss of goods or money (your own or for which you are responsible)
How Can Professional Indemnity Insurance Protect Accountants?
Arranging professional indemnity insurance will ensure that an Accountant complies with the rules of their professional body. In the UK, the main professional bodies are;
- Association of Chartered Certified Accountants (ACCA)
- Chartered Accountants Ireland (CAI)
- Chartered Institute of Management Accountants (CIMA)
- Chartered Institute of Public Finance and Accountancy (CIPFA)
- Institute of Chartered Accountants in England and Wales (ICAEW)
- Institute of Chartered Accountants of Scotland (ICAS)
Each of these bodies have rules specifying the minimum levels of cover that an Accountant needs to arrange.
We mentioned at the beginning of this article that there are a lot of professions which may be liable to the risk of professional indemnity claim – so what makes accountants particularly susceptible? Firstly, accountants handle huge amounts of personal data and if a mistake is made, such as a data breach for example, the results can be vast and costly. Accountants also provide advice and consultancy to clients. If this advice is incorrect or inadequate, it could be seen as a failure to meet an expected standard of work, which could easily grow into an expensive professional negligence case. An accountant could also face compensation claims should the client make a financial loss due to the advice provided.
How Long Does An Accountant Need Professional Indemnity Insurance For?
It is a common misconception that finishing work as an accountant means that claims can no longer be made against you. That is not the case. If you cease to practise you should consider planning for continued professional indemnity insurance to cover the next six years. Claims can be made at a later date for work undertaken whilst you were actively practicing accountancy and your previous policy would not cover you for claims made after the policy is cancelled.
What Other Insurance May Accountants Require?
Employers Liability Insurance
If an accountancy business has employees, it is required by law that it obtains employers liability insurance. Employers liability insurance covers the cost of settling or defending an employee claim if they have suffered injury or disease because of their work.
Public Liability Insurance
Every day accountants face the risk of legal action being taken against them in respect of their liability for personal injury or property damage arising in the course of their business activities. The awards that may be made as a result of a successful claim can be catastrophic but even the legal costs of defending the most spurious claim can cause severe financial hardship.
Office Contents Insurance
This would provide cover for loss or damage to the contents of an office such as furniture, telephone systems, computers etc. Cover can be arranged for separate business premises or for an office at home. In addition, most Office Insurance policies will include Employers and Public Liability cover too so there would be no need to arrange these separately.
Cyber Liability Insurance
With cyber attacks on the increase, it may be wise that accountants consider obtaining cyber liability insurance. As an accountant, the client data stored is sensitive and value, and therefore if hacked and the data is stolen, the practice/contractor may have a class action lawsuit to deal with. Cyber liability insurance can take care of all recovery costs, including legal feels, regulatory fines, penalties and the cost of restoring data and systems. If can even pay for PR costs if the business reputation has suffered.
At John Heath Insurance Brokers, we can provide every type of insurance that an accountant may require. If you would like to find out more information about the types of policies that we can offer, please contact a member of our team.