PI Insurance

Question 1

What is PI insurance?

Answer 1

A form of insurance for companies that provide professional services to clients

Question 2

What is the latest version of the RICS Professional indemnity insurance requirements regulation document?

Answer 2

Version 9 effective February 2022

Question 3

What is the purpose of PI insurance?

Answer 3

• Protects firms from financial loss.
• Covers liability for damages to third parties due to professional breaches.
• Ensures clients are safeguarded against financial losses the firm cannot cover.

Question 4

What are the RICS PI requirements?

Answer 4

• must be an ‘each and every’ claim basis or aggregate plus unlimited round the clock reinstatement basis.
• must comply with RICS:
  -minimum policy wording (or more comprehensive).
  -minimum level of indemnity.
  -maximum uninsured excess.
• underwritten by a listed insurer.

Question 5

What is the maximum level of uninsured excess (the part of each claim the firm must pay itself)?

Answer 5

Indemnity up to £500K = The greater of 2.5% of sum insured OR £10,000
Indemnity over £500K = 2.5% of sum insured

Question 6

What does ‘claims made’ basis mean?

Answer 6

the policy covers claims that are made during the period of insurance regardless of when the negligent act occurred

Question 7

What are the minimum requirements for run off cover?

Answer 7

For consumer claims
RICS’ minimum policy wording for consumer (any natural person acting for purposes outside their trade, business or profession) claims, requires a limit of £1,000,000 in all for a period of six years from the expiry date of the policy in force at the time of cessation.

For non-consumer claims
The requirement is for firms to have adequate and appropriate run-off, but RICS would expect run-off to be a maintained for a minimum period of six years from the cessation of the practice. Run-off for commercial activity may be arranged and paid for on an annual basis.

Question 8

What are the minimum levels of indemnity for RICS regulated firms?

Answer 8

Turnover = £100K or less = £250K
Turnover = £101K-£200K = £500K
Turnover = over £200K = £1M

Question 9

What are the limitation periods for PI insurance?

Answer 9

6 years when executed under hand.
12 years when executed as a deed.