Glossary · UK
What is Professional Indemnity Insurance?
Cover for the cost of claims that a business gave negligent advice, made a mistake in its professional work, or breached client confidentiality, causing a client financial loss.
Full Definition
Professional indemnity insurance protects businesses and individuals who give advice or provide a professional service against claims that the advice or service was negligent, contained an error, or otherwise caused a client to suffer a financial loss -- for example an accountant's miscalculation leading to a client being fined by HMRC, an architect's design error causing costly rework, or a consultant's advice turning out to be wrong. Unlike public liability insurance, which covers physical injury or property damage, professional indemnity insurance covers purely financial loss arising from the quality or accuracy of professional work, including the legal defence costs of contesting a claim even where the business believes it did nothing wrong. It is a mandatory condition of membership for many regulated professions in the UK, including solicitors, accountants regulated by the main accountancy bodies, financial advisers, architects, surveyors and some healthcare professionals, and is frequently required contractually by clients even where there is no regulatory requirement -- particularly for consultants, IT contractors, marketing agencies and anyone whose work, if wrong, could cause a client a significant financial loss. The level of cover required is usually set by a regulator or professional body as a multiple of the firm's annual fee income, or as a fixed minimum sum insured per claim.