Chartered accountants in practice hold professional indemnity to their institute's specification rather than to whatever the market offers. The regulations set the limit, the insurer criteria, the cap on the excess and the run off requirement, and a policy outside them does not satisfy the practising certificate condition.
The specification
A limit calculated from gross fee income with a floor for small practices and a ceiling above which it stops scaling. Insurer criteria the policy must meet. A maximum excess relative to income, so that nominal cover with an unpayable deductible is not possible. And cover extending to the practice, its principals and its staff.
Recalculating it
Income moves and the required limit moves with it. A practice that has grown, taken on a materially larger client or shifted towards advisory work should recalculate rather than renew at last year's figure, because the requirement is on the current position rather than on the one at the last renewal.
Run off
Required for a period after the practice ceases, because claims about past work arrive after the doors close. It is the largest planned cost of winding a practice down and belongs in a succession plan rather than arriving with the decision to retire.
Where claims actually come from
Tax advice and planning produce the largest claims, corporate finance and valuations the most contested, and compliance work the most frequent small ones. Insurers ask for the split because the records differ so much, and a practice whose advisory work has grown without the limit moving is the classic underinsurance case in this profession.
Questions people ask about chartered accountants professional indemnity insurance
Who sets the requirement?
Your institute, through its professional indemnity regulations, as a condition of the practising certificate.
How is the limit worked out?
From gross fee income with a floor and a ceiling, on the formula the institute publishes and reviews.
What happens when the practice closes?
Run off cover is required for a stated period. It is substantial and should be planned for rather than met by surprise.