Professional Indemnity Insurance

Setting up professional indemnity insurance (PII) as an RICS member is crucial for protecting yourself and your business from financial losses arising from potential claims due to professional negligence. Here's a breakdown of the key steps involved:

Understanding Your Needs:

Assess your risk profile: Consider the size and nature of your practice, the types of services you offer, and the potential risks associated with them. This helps determine the level of PII cover you need.

Review RICS requirements: RICS has minimum PII cover requirements for members based on their annual turnover. Ensure your chosen policy meets or exceeds these minimums.

Finding the Right Insurance Provider:

Shop around: Compare quotes from different insurance providers to find the best combination of coverage, premium costs, and service quality.

Ask for recommendations: Seek advice from colleagues, RICS representatives, or insurance brokers specialising in professional indemnity for surveyors and valuers.

Consider specialist brokers: RICS provides a list of experienced brokers who specialise in PII for RICS members, offering greater understanding of your specific needs.

Key Policy Features:

Scope of cover: Ensure the policy covers the range of activities and services you provide under your RICS membership.

Indemnity limit: Choose an appropriate indemnity limit based on your risk profile and potential financial exposure.

Run-off cover: Consider run-off cover if you plan to retire or close your practice in the future, as claims can arise long after the work was completed.

Excess layer: You might want to consider an excess layer to reduce your premium costs but still have comprehensive protection for larger claims.

Additional Considerations:

Claims history: Disclose any previous claims or complaints against you honestly to avoid policy exclusions or premium increases.

Policy wording: Carefully review the policy wording to understand the terms, conditions, and exclusions before signing.

Ongoing communication: Maintain open communication with your insurance provider and inform them of any changes in your practice or risk profile.

RICS APC Question:

You are advising a client on the purchase of a commercial property with potential environmental liabilities. Discuss the importance of professional indemnity insurance for your role as a surveyor in this transaction, both for yourself and the client.

Answer:

Importance of Professional Indemnity Insurance for the Surveyor:

• Risk Mitigation: Environmental liabilities can be complex and unpredictable, even with thorough due diligence. PI insurance protects me from financial losses if my advice or services related to the environmental aspects of the property lead to a claim against me.

• Client Confidence: Demonstrating possession of PI insurance instills confidence in my client, knowing that they are financially protected in case of errors or omissions on my part.

• Regulatory Compliance: As a RICS member, holding PI insurance is mandatory for professional practice. Compliance protects my professional standing and avoids potential disciplinary action.

Importance of Professional Indemnity Insurance for the Client:

• Financial Protection: Should any environmental issues arise due to my advice or services, PI insurance ensures the client is not solely responsible for financial redress.

• Dispute Resolution: PI insurance facilitates swifter resolution of potential disputes, as both parties are confident in the availability of financial resources for remediation or compensation.

• Peace of Mind: Knowing that PI insurance is in place provides the client with peace of mind and allows them to focus on the transaction without undue anxiety about potential liabilities.

Discussing PI Insurance with the Client:

• Explain the Scope: I would clearly explain the scope of cover provided by my PI insurance and any potential exclusions relevant to the environmental aspects of the property.

• Identify Risks: I would collaborate with the client to identify potential environmental risks associated with the property and advise them on how PI insurance can mitigate those risks.

• Recommend Coverage Level: Based on the identified risks and the client's risk tolerance, I would recommend an appropriate level of PI insurance coverage.

Conclusion:

Professional indemnity insurance plays a crucial role in protecting both the surveyor and the client in property transactions with potential environmental liabilities. By understanding its importance and effectively discussing it with the client, I can demonstrate professionalism, ensure compliance, and contribute to a successful transaction.

Additional Considerations:

• The APC assessor may ask follow-up questions about specific clauses of the PI policy or about alternative risk mitigation strategies.

• Be prepared to discuss the potential impact of any exclusions on the client's protection.

• Emphasise the importance of clear communication and collaboration with the client throughout the transaction.

Remember to tailor your answer to the specific details of the scenario provided by the APC assessor.