1st June 2017
The Insurance Act 2015 came into force last August and represents the most significant reform to commercial insurance law in over 100 years.
It is the culmination of several year’s work by the Law Commission in conjunction with insurers, brokers and their customers. Designed to reflect the requirements of a modern insurance market, the Act reflects best practice in the UK insurance industry – giving policyholders more power and placing risk under renewed scrutiny.
Although the disclosure obligations on policyholders are lessened – and the remedies for breach are now proportionate – policyholders should still do their best to ensure they comply.
Whilst the legislative updates from the Act have been made to most types of commercial insurance, it is Professional Indemnity Insurance (PII) – which we provide at highly competitive premiums to Lifecycle members – that is most relevant to accountants.
PII is often one of a firm’s largest overhead costs but, in an increasingly litigious society, it provides vital protection to both practitioners and their clients in the event of a negligent error or omission that leads to a financial loss.
As well as the risks encountered in the course of day-to-day practice, accountants are advised to contact their broker well in advance of their PII renewal to ensure that they are fully aware of their increased responsibilities and other implications in this ever changing regulatory environment.
Creating most cause for concern
There are still a number of areas that continue to cause insurers concern. In recent years there has been a particular focus on tax mitigation schemes with HMRC clamping down on the practice through the Disclosure of Tax Avoidance Schemes (DOTAS) regime. A number of high profile cases should serve as a warning to practices who choose to advise on such schemes as they, and subsequently their PII policies, could become the scapegoat should their clients be forced to repay what can be considerable sums in unpaid taxes.
Firms should initially consider whether they wish to provide this service at all as it could have a significant impact on their PII premiums whilst some insurers will refuse to provide cover at all. Even when acting as an intermediary or introducer, it is vital to assess the residual exposure that this presents and the measures that should be taken to limit liability.
Steadfast procedures should be put in place to ensure and evidence that the client is made fully aware of the potential risks of participating in such schemes and make clear exactly where the scope of service, and therefore liability, begins and ends.
Is your broker offering the best cover for your business?
Firms are spoilt for choice in the current market with an increasing number of brokers and insurers touting for their business. This increased capacity has led to a competitive environment that has helped to suppress rates and premiums. As such, firms are advised to conduct a regular benchmarking process in order to ensure that they are paying market rates.
Continuity and loyalty do pay dividends as building a relationship and pot of premium with a single insurer over a number of years will often lead to a more favourable service and outcome in the unfortunate event of a claim.
However, if you have found yourself to be renewing with the same insurer and at the same premium for a number of years it is possible that there is a potential saving to be made if your broker and insurer have become complacent.
Lifecycle have partnered with global insurance broker and risk management company Arthur J. Gallagher to provide members with an exclusive PII product that provides wide-ranging cover at extremely competitive premiums. For more information or to get a quote, click here to join Lifecycle free of charge today and visit the members’ section of the website.
About the Lifecycle network
Lifecycle is a unique network for accountants – provided by the Leonard Curtis Business Solutions Group.
Lifecycle is free to join and also offers members many additional benefits. These include eligibility for a competitive Professional Indemnity insurance scheme, a regular programme of free training and education and discounts on products and services relevant to their business and clients’ needs.
Services offered by Lifecycle include: Company secretarial and formation; equity finance for SMEs; debt advisory for SMEs; personal debt advice; corporate restructuring, insolvency and cessation; debt finance for SMEs; cashflow maximisation; property solutions and legal services.
For more information on Lifecycle click here and to become a member of Lifecycle click here or call for free on 03300 242 333.
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