Fear of the unknown

You may think you have more business insurance cover than you'll ever need. Think again. Lesley Meall

suggests you may be not as well covered as you think


Unless you work in the insurance industry, you probably see it as a necessary evil. Buying insurance cover is a grudge purchase we make for one of two reasons: because we have to, or we think we have to - some is required by law, some by prudence. Either way, when the time comes to make a claim, many of us discover we are not as adequately protected as we thought.

"We are advising all members of the IFA and the IAB to check their indemnity insurance to make sure they are covered for the work they are actually doing," says Ian Irwin, chairman of the IFA and IAB Councils. There is a view, that Professional Indemnity Insurance (PII), once purchased, provides universal protection against liabilities incurred in the course of your practice, but this is not the case.

Complex requirements

There are a number of areas that require careful consideration, such as changes in partnership arrangements. It's not uncommon for new partners to join and old ones to leave, or for partnerships to split into two or more practices. This can create complex insurance requirements, making it easy for accountants to believe they have policy cover when no such cover exists. Partnership changes can also result in complications in areas such as retroactive cover. Firms are advised to notify their insurers of any changes in this area as soon as is practical.

Firms are also advised to notify their insurance company of any potential claim as soon as possible, or risk exposure. If, for example, the firm receives a solicitor's letter on 1 March, changes their insurer on 1 April, and then notifies this insurer on the service of a writ on 1 May, it is unlikely that either new or old insurer will be prepared to accept the claim.

For some practitioners, making a claim is the least of their problems. In the current economic climate it can be difficult to find adequate and affordable levels of cover - and some members of the IFA have experienced problems.

Until recently, accountants paid less for PII than members of many other professions, because they tended to make fewer claims. But PII premium rates have increased by between 30 per cent and 50 per cent over the past 12 months. This has been partially driven by high-profile accounting scandals, but also by a general hardening of the insurance market.

"There are fewer suppliers than there were a year ago," says Dave Coughlan, head of Zurich Professional. "Some no longer provide professional indemnity cover; others have become more selective."

Numerous professional bodies have called on the Government to help, with what is fast becoming a crisis in the liability insurance market. But as John Walker, policy chairman with the Federation of Small Business comments on action taken in the Budget: "Rocketing insurance premiums have given the Chancellor a windfall of ?325 million. Freezing insurance premiums tax does nothing to assist small firms that can't secure liability insurance at any cost."

What can help, in some cases, is a change of approach. "Accountants tend to leave it until quite late to renew their policies," says Coughlan, so shopping around isn't as easy as it could be. He also suggests accountants give more consideration to cover levels and limits: "A ?500,000 limit per claim aggregating at ?1.5 million for the period will cost less than a ?500,000 limit per claim without the aggregation cap."

Accountants can also improve their position by ensuring their terms of engagement explain their services fully and clearly.

On the move

The nature of the work undertaken by practitioners of accounting and book­keeping also creates some general areas of concern in relation to commercial cover.

If you travel on business you will need to be careful about the level and type of cover you have relating to transport and the transportation of computer equipment.

Check your policies for your mobile phone and laptop and you may well find exclusions and exceptions relating to their use. According to the latest figures from Complete Computer Cover (CCC) British business risks loosing millions of pound each year to stolen and damaged laptops because of inadequate insurance cover.

"Many businessmen and women do not realise, until it is too late, that once a laptop leaves the office it is not covered," says David Milner, CCC managing director, "or that the excess often totals more than the cost of the laptop itself."

In addition to the issue of off-premises use for company machines, many individual owners are less well covered than they think. "Personal machines are often included on home contents insurance," says Milner, "but once they've been used for business they're no longer covered."

This is also a danger area for car drivers. If the vehicle you use for business is covered only by personal insurance you are exposing yourself to unnecessary risk. If an accident occurs while you're travelling on business you are unlikely to be covered; and just carrying work-related papers can be enough to trigger an exclusion. As Irwin cautions, you should be aware of "what a difference a briefcase in a back seat makes". •


Карта сайта

English version

LBN100 Elite


© 2001-2002 Все права защищены. Перепечатка материалов допускается только с письменного разрешения Postgraduate-RAA
Дизайн сайта:
Овчинников & Меликян. Создание: АК.