You are a professional; you have earned your degree, and your title through years upon years of hard study and painstaking learning. You have established a firm, a company or an office to finally practice your profession.
You have trust in your judgment, and of course, you want to provide quality service to your customers.
But one day all these come to an end. You arrive sleepy, uninterested and unprepared for a client. You gave an advice that has caused terrible consequences to him.
He suffered financial loss and even loss of property due to your reckless advice. You are unprepared; he sues you and suddenly, all your great efforts, time and money spent in reaching your professional goals will go down the drain!
What could save you now? If only you had the right insurance to cover you for these risks!
Professionals are indeed very experienced in their respective fields. Professionals may be found almost across all industries: there are medical consultants, financial advisers, project managers and so on. But how could professionals protect themselves in the many possible risks that could happen in their business?
Table of Contents
- 1 What is professional indemnity insurance?
- 2 Does my business need it?
- 3 Professions that are required to have PI insurance
- 4 What does this insurance actually cover?
- 5 What will Professional Indemnity Insurance cost me?
- 6 Public Liability Insurance versus Professional Indemnity Insurance
- 7 The importance of talking to a professional insurance broker
- 8 What Australian companies offer this type of insurance?
- 9 How much is professional indemnity insurance?
- 10 Why look for a professional indemnity insurance quote
- 11 Looking for cheap professional indemnity insurance
Professional Indemnity, or PI insurance, is a type of insurance that covers professionals. It protects them from any kind of risks that are due to their negligence or mistakes.
Professionals after all are just human beings, they can make mistakes. And since customers, consumers or clients trust that professionals give the best advice, it is therefore important that people in the consulting and services industries have a cover to protect themselves in case something happens.
What is professional indemnity insurance?
To learn what PI insurance is all about, it would be wise to start by finding out professional indemnity insurance definition. If this insurance product was to be defined, it would be summed in a sentence that goes this way:
This insurance is a form of insurance coverage that is suitable for professionals and their businesses; this is in the event that the policy holder makes a mistake or an omission is committed during the course of their work which leads to a loss of a third party.
PI insurance explained in simple terms is all about providing coverage for any kind of risk that a professional may face during the course of his/her work.
PI insurance covers any expenses or loss that a third party may suffer from:
- This may be medical expenses that the other party may have incurred as a result of negligent advice. Examples of these expenses could be medical bills as a result of a wrong advice provided by a medical professional, medical and surgical expenses as a result of an accident due to structural collapse of a home or a building due to an architect’s error in building design, or any other related medical expenses.
- This may cover fees that the other party may have incurred after undergoing psychological consultation and treatment.
- This may cover the financial loss of the other party as a result of an advice made in error such as overlooking factors in business leading to the client’s bankruptcy or financial loss.
- This may cover trauma, as a result of any injury from erroneous advice.
- This may cover financial loss as the head of the family of the other party.
- This may cover expenses due to the death of the third party as a result of an erroneous advice.
- There may be more expense that may not be mentioned in this list.
PI insurance also covers all costs of legal actions that may be needed to protect the policy holder and all claims for damages that have resulted from the act, violation or omission of duty of a professional during the course of performing his work.
In other words, this kind of insurance cover protects the reputation of a professional in case a legal suit or claim may be filed.
Does my business need it?
It is not mandatory to have personal indemnity insurance, however it is recommended for all professionals to have it. PI insurance is needed by businesses, especially those companies that offer services or provide advice.
It will alleviate risks and damages, due to terrible claims and lawsuits by customers.
One such example of PI insurance is medical indemnity insurance. It is a kind of professional insurance that provides cover for professionals working in the medical field.
Members of the medical community that provide medical advice to patients or clients should protect themselves from any kind of risk.
Doctors, surgeons, medical specialists such as neurosurgeons, gynecologists, urologists, psychiatrists, pathologists and plastic surgeons all provide professional advice to customers.
Any miniscule error could lead to catastrophic events that could cause injury or even death to patients. A medical professional that is caught unprepared could end up with severe financial losses and even face suspension from his profession if he/she is found to be negligent in his/her duties.
Professions that are required to have PI insurance
Before, there were only a handful of professionals that a required to have PI insurance; only accountants, doctors and solicitors need this kind of insurance plan.
However, as the years chanced and a wide variety of businesses and professional fields have evolved, there is a pressing need to provide quality service to clients and this is a responsibility that all professionals have to their clients.
Therefore professional insurance is compulsory in the following professions: accountants, medical practitioners, solicitors, insurance brokers, financial advisers, people that work in the media and people that provide professional advice.
The true nature of the profession of these individuals affect the amount of risks that they have to take each time that they offer their services; with PI insurance, professionals reduce a great deal of risk in their work.
How about other professionals? Professionals such as those in the IT industry, engineers, architects and other consultants are not required to have PI insurance, however they could benefit so much from this kind of insurance plan since any kind of negligence in the part of the professional or his staff will certainly lead to severe complaints and even lawsuits from customers.
What does this insurance actually cover?
Indemnity insurance covers the following:
- Breach of duty, should there be a claim that a professional duty has been overlooked or violated.
- Violations of the rules in the Trade Practice Act or state laws that is similar to this act. An allegation of a misleading conduct may be considered a violation of this act.
- The dishonest actions of employees that are directly under their professional employer. This type of insurance therefor extends to the damages due to the negligent and dishonest actions of employees.
- The accidental infringement of the copyright of another person.
- The damages or loss of important documents or blue prints
- The costs of filing libel or slander cases to people working in the media.
PI insurance covers some civil liabilities of professionals as well. Here are the following cases:
- Breach of duty which includes claims due to breach of confidentiality, fiduciary duty and other privacy related concerns.
- Contractual liability which includes coverage for professionals who failed to follow the agreement that is contained in any contract that has been created before any kind of business or process.
- Intellectual property includes a deliberate or non-deliberate act of violating intellectual property rights.
- Breach of consumer, competition and Fair Trading Acts. This includes any violation of this act which is applicable in New Zealand and Australia.
- Defamation includes coverage for any comments made against a company and even any comments that is made out of good faith.
- Libel or slander includes coverage for any written or oral comments that could lead to lawsuits of any kind.
What will Professional Indemnity Insurance cost me?
Just like with any kind of insurance product, the cost of public indemnity insurance may vary according to the needs of the insured. Getting a PI insurance that will provide the most coverage will therefore be according to the assessment of an experienced business insurance broker or insurer.
Usually a broker that works for professionals will assess the need of his clients according to a set of factors. These will allow a broker to approximate the coverage that his/her clients need:
- The turnover of the fees of the policy holder will assess the nature of work and the volume of work that his business handles. Basically the more work handled the higher coverage is needed. A higher monthly premium is needed if there is a high chance that a third party may file for a claim.
- A business that has a higher contract value means that if anything ever goes wrong settlement for any claims would also be expensive. Needless to say that a high settlement value will result to an expensive premium each month as well.
- The nature of the business also provides an eye view of how much PI insurance is needed. If the professional is exposed to high risks in his/her job such as an architect, a medical professional, financial adviser or stock broker, then he/she is certainly placing himself into a lot of risks as well. This professional needs a higher than usual insurance coverage.
- The insurer considers the business owner to determine coverage. A sole trader or someone that conducts business on his own will have adequate coverage for just $500 premium as compared to a multinational company that should pay thousands of dollars in professional insurance just to secure enough coverage.
- The insurer will study the risk management terms and conditions that the business has. This considers how the business is structured and how the business is handled by the owner. Poor management and risky decisions by the business owner will lead to higher premium payments.
Public Liability Insurance versus Professional Indemnity Insurance
Public indemnity insurance is another type of business insurance that provides coverage for business owners. Also called public liability insurance, this kind of insurance product covers all the possible liabilities that a business owner takes as he provides services to customers or sells his/her products to consumers. He/she is basically covered for any injuries, loss of property or even death of a third party as a result of his/her business.
This kind of business different from professional indemnity insurance in the sense that the policy holder is insured against any kind of loss or injury as a result of his/her errors in providing advice or as a client seeks consultation.
These two kinds of business insurance may or may not be used or followed by a business owner or a professional, however the business owner should be aware of the risks that he/she is taking as he conducts business.
The importance of talking to a professional insurance broker
There are immediate quotes available from almost all insurance companies, but do you know that one way to get fast, reliable and efficient insurance advice is to talk to a professional broker?
A broker will be able to help business owners come up with a suitable insurance coverage that is right for their business.
They will also be able to provide the following services:
- A broker will be able to conduct a professional assessment of your needs as a business owner, and this is without overlooking anything on your part that can lead to terrible consequences in the future.
- You save time in looking for efficient coverage especially when you need to get protected right away. Professionals that are not covered by PI insurance may be needed in a special project or job which could significantly improve his/her career and surely there is no time to waste in looking from one insurance site to another. You can get the most suitable coverage and at the same time get insured right away too.
- You will be able to secure your business and your profession locally, as well as from one state to another when you hire an interstate broker. You can feel confident in providing professional consult and totally improve your business reputation when you have PI insurance coverage from different states.
- With a broker, you are confident that you are getting the most updated information about PI insurance coverage and get the most suitable plans for your profession and business.
- Finally, you will have all the information you need in the palm of your hands when you choose the services of an insurance broker.
Are the requirements for professional indemnity insurance different state by state?
Different Australian states have different requirements when it comes to professional indemnity insurance. Some states require professionals or some professionals to get PI insurance before they are granted with a license to operate.
Learning all these requirements will help you prepare your business requirements ahead of time. Here are state by state requirements for PI insurance:
New South Wales has a Property, Stock and Business Agents Regulation Act 2002 which requires all licenses provided will be insured under a PI insurance policy.
Last year, NSW has made amendments to this act saying that all professionals that are applying for license should also seek PI insurance coverage.
The local government wants to provide peace of mind to professional brokers and real estate agents and therefore has strengthened the power of this act.
PI insurance in Queensland is not compulsory. In fact, the cost of having PI insurance in the state has increased due to the increase in stamp duty price.
And of course due to this increase, a lot of businesses now choose not to be covered which can significantly affect the way business owners conduct businesses with customers.
PI insurance is mandatory for professionals in Western Australia especially for architects. Architect in WA are required to have a minimum cover of $1 million before they are given a license to operate.
Architects that work in architectural firms should be insured through their employers or get their own plans or policies. Architects that are located overseas may need to have PI insurance policies in place for any projects done in WA.
This insurance is not a requirement to renew their registration.
In Victoria, there are specific requirements for professionals that would like to secure a business license. The Victorian Health Professionals Association has improved the processing of insurance claims.
There is a zero-excess policy while those that would like to secure a claim are provided immediate assistance. PI insurance is compulsory for all health practitioners since there are some reports of negligence in this field.
This new policy has been provided by the VHPA to promote high quality safety for all its members.
Professionals that are providing private practice are required to take professional indemnity insurance. Those that operate overseas and operate interstate in the government and corporate sectors may be exempted from this rule provided that they apply for an exemption.
Under the Legal Practitioners Act of 1981, SA PI insurance coverage should be up to $2 million for each claim. This is a scheme that is applicable for professionals that practice their own business or whether in a partnership or a member of a company.
The Legal Practitioners Act is managed by the Law Society of South Australia.
Nurses and midwives are provided coverage in Northern Territory. The Australian Nursing Federation would like to promote better services for its members located in NT.
Insurance policy coverage of these professionals have increased up to $10,000,000 for each claim and $50,000,000 for aggregate. This covers civil liabilities for any negligent acts, omissions and errors.
Section 312 of the Legal Profession Act of 2006 of the ACT Bar Association declares that all legal practitioners will not have access to a licensing certificate unless they submit proof that they are covered with professional indemnity license.
The Bar Council has mandated that the minimum level of insurance for Professional Indemnity that a barrister should have is $1.5 million; policies from AON, Marsh, Suncorp Metway and Wilis. It is the sole responsibility of a barrister to look for the most suitable coverage for his particular legal specialty.
PI insurance TAS
The Health and Community Service Union (HACSU) in Tasmania requires it members to be covered by the HACSU insurance policy. Therefore if you are a medical professional such as a nurse, a physical therapist, ambulance driver or a paramedic in Tasmania then expect to have malpractice coverage of up to $10 million for every claim and $70 million in aggregate. Good Samaritan Acts Endorsement is also covered by PI insurance.
What Australian companies offer this type of insurance?
To compare professional indemnity insurance, a professional should rely on a comparison table of top Australian insurance companies that offer this service. AON professional indemnity insurance for instance is one of the most popular PI insurance provides in the country but how sure are you that this would be better than an Allianz professional indemnity insurance?
There are some insurance companies that are more experienced but do you need to have experience to provide the most coverage for your customers?
All these questions are commonly asked by professionals that are looking for the most efficient coverage for their business. And usually it all boils down to which company offers the best package or the best plan.
Before all these could be determined, a comparison of the most popular Australian companies should be done.
|Company Name||Expertise||Insurance Product Features||Business Specialty||Online Quote Availability||Consumer Online Rating|
|AON||Has been in business since 1971||With a Business Continuity Management products designed to improve human capital, protect reputation & create efficient business infrastructure||Broking & Risk Management, financial planning, human capital consulting & insurance transactions||Available||5 out of 5 stars rating online|
|BRIC||Established in 1996 specializing in PI insurance||PI insurance for different kinds of professions such as engineers, IT, construction and so on||Specializes in Professional Indemnity, Builders Insurance, IT Liability & Public & Products Liability||BRIC does not offer a free online quote. You need to call 1800 077 933 for consultation||4 out of 5 stars rating online|
|CGU||One of Australia’s largest general insurers, with experience of over 140 years||Provides an IT liability for public liability for trades and Business Pack for professional indemnity & broad-form liability||Offers wide range of commercial and rural insurance products for small to large multi-national corporations||Available||4 out of 5 stars rating online|
|QBE||One of the top 20 global insurers & re-insurers||PI insurance products such as Association Liability, Defamation, IT & Communication Tech, Medical Malpractice Insurance, Supplemental Legal Expenses, Trustees Liability, Statutory Liability||Business Insurance to cover a wide range of commercial risks||Available||4 out of 5 stars rating online|
|Zurich||2014 NIBA General Insurer of the Year||PL insurance includes IT Professional Liability, SME Professional Indemnity & Architects & Engineers Professional Indemnity||Operates as a single brand in General Insurance & Life Investments & Business||Zurich does not offer a free online quote, you should call 132 687||4 out of 5 stars rating online|
How much is professional indemnity insurance?
The cost of public indemnity insurance may vary depending on the needs of the insured. The most affordable and the cheapest PI insurance may not completely cover your business as well as you reputation!
Therefore you need the assessment of an experienced business insurance broker or insurer.
A broker that works for professionals will be able to assess the need of his/her clients depending on several factors. These factors basically help brokers to approximate the coverage that his/her clients need:
- A broker will examine the turnover of the fees of the policy holder to be able to assess the nature of work and the volume of work that his business handles. The more work handled by the business, the higher coverage is needed.
- A broker also takes into consideration the contract value of jobs provided by the professional. Businesses that have a higher contract value means that claims would also be expensive resulting in an expensive premium each month as well.
- A broker analyzes the nature of the business. This provides insight of how much PI insurance is needed. Architects, medical professionals, financial advisers or stock brokers have higher risks compared to other jobs.
- A broker also considers the applicant’s risk management terms and conditions that his business has in determining the coverage for this insurance The broker considers how the business is structured and how the business overall handled by the owner. Therefore poor management and risky decisions by the business owner will surely lead to a higher premium payment.
Why look for a professional indemnity insurance quote
A PI insurance quote is very helpful if you want to find an approximate value or coverage for PI insurance without the need to consult a professional broker. It has been discussed how talking personally to a broker has its advantages, however there are also benefits of using an insurance quote.
- A quote is automatic, simply place information that is asked and you will instantly get a result. The result is an approximate value of your coverage and it is dependent on factors such as the size of your company, the number of employees, your position in the company and other factors.
- A quote may be tweaked or you may change the values that you place on the quote and you will get a different result each time. If you are not satisfied of the results, you can simply change the values that are required by the quote.
- A quote usually has a link to personally contact (call, email or chat) a professional broker. Therefore, it gives you a heads up of what you need to expect when you talk to a live person. Anyone may contact an agent or a broker even if he/she is not a member or has not purchased any insurance products yet.
- A quote is FREE! You may use this service anytime you wish. You may even save it in your browser or send it to a friend who needs it. Be sure to check for free quotes from at least three or four insurance sites.
- An online quote may be the second best thing to talking to a live broker especially when you live in a remote location. It could be very difficult to locate a broker near you or to come to an insurance office if you live very far away.
Looking for cheap professional indemnity insurance
How do you look for cheap PI insurance? One way is to reduce your premium payments each month by observing professional business practices.
You and your employees (if you have one) should keep these safe practices to be able to protect your business and your reputation and of course to provide high quality service to your customers at all cost.
Cheaper premium payments may be possible through the following top 5 ways to improve premium monthly payments:
- Create sound business goals and mission and vision statements to motivate your employees. This will inspire them to always think of high quality service and to place your mission statements in priority every they conduct any kind of business.
Make your mission and vision statements meaningful and easy to remember.
- Conduct regular employee training especially in providing your services, selling your products and communicating with customers. Customer service should be seamless so provide a script for your agents to follow to reduce mistakes in dealing with customers’ problems.
- Take time to evaluate employee performance. You should randomly select employees to check for quality performance.
- Think twice and refer to your knowledge base before you give any kind of professional advice or service. Rely on what the customer is asking for and base your advice on customer cues.
- Innovate yourself, improve your skills and undergo additional training for your profession so you can help improve your business as well.