From Adviser Guide: Getting Professional Indemnity Insurance
Q: How do I make sure I am properly covered?
Building or maintaining a strong relationship with your broker, who understands your precise needs and confines, is vital.
As there are no minimum terms in personal indemnity insurance for financial advisers, policy wordings can vary widely. Moreover, if it’s not an area of your expertise, the phrasing can also be very technical.
Building or maintaining a strong relationship with your broker, who understands your precise needs and confines, is vital. The FSA has made PII a requirement, so it cannot be viewed as a mere expense, but as a risk management provision.
“Knowing your clients is vital to your business and this should be echoed within the insurance industry,” says Teresa Brewer, Sales and Services Director, Aon UK.
“Your broker needs to know about your firm not just at renewal but also if the firm is changing or you’re considering a different strategy for the firm. Review your wording and if in doubt seek guidance from your broker.”
When it comes time for a firm to renew its PII policy, it’s critical to check not only the cover but any conditions or exclusions. “Conditions can be binding and by breaking them you can invalidate the policy,” cautions Ms Brewer.
“A common condition is notifying claims as soon as you are aware as the risk is that if you do not notify the claim the insurer’s position has been affected. This can result in a claim being declined.
“For larger firms small claims handling provisions can be agreed which gives the firm the freedom to settle claims under a certain level and subject to criteria.
Exclusions should be clear in most policies but if you don’t understand any, ask for guidance.
“Worth noting is some policies will offer an innocent non disclosure clause which means that if you did not disclose a piece of information to an insurer, which may have affected their judgement, if the non disclosure is free from any fraudulent conduct, misrepresentation or intent to deceive the insurer will not avoid the policy.
“Finally, don’t assume you are covered for everything as when it comes to PII its much easier to ask permission than forgiveness.”