Professional Indemnity Insurance for Chartered Surveyors

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Professional Indemnity Insurance for Chartered Surveyors

RICS HQ to illustrate professional indemnity insurance for RICS members

For over a decade we have been arranging professional indemnity insurance for Chartered Surveyors and other property professionals. We will help you find the best Insurer for your business and our end to end service will guide and support you throughout.

    • Competitive premiums
    • Fast service
    • Seamless change of insurer
    • No pushy salespeople - just insurance experts
    • RICS compliant cover
    • Special rates for new firms
    • Claims management

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Guide to Professional Indemnity Insurance for Chartered Surveyors

Please read our guide which covers the main points to consider when arranging this important insurance.

How much does it cost?

Rates for this insurance typically range between 1% to 5% of fee income for a multi-discipline firm, depending on the usual risk factors and market competition. But rates can be higher depending on the work undertaken, the claims history etc. Rates are discounted for new start firms where there is no history or legacy to insure.

You should also bear in mind that minimum premiums apply which will vary between insurers. The minimum premium is the insurance company's starting point for insuring a risk and can vary significantly. For example, a minimum premium for a RICS member firm could be £ 500 or £ 1,500 depending on the insurer.

It's not good practice to buy professional indemnity insurance as a 'commodity' purchased only on its price. However good the policy wording is, professional indemnity is commercial insurance and coverage disputes can still occur. Use a specialist broker to get some good advice.

Setting up a new RICS firm

When setting up a new firm RICS regulations will require you to carry compliant professional indemnity insurance. This must be in accordance with the regulatory requirements of the RICS. To obtain a quotation, the following documents are required:

  • Fully completed proposal form
  • CVs or profiles of the partners or directors
  • copy of the business plan (optional)
  • cash flow forecasts (optional)

This information helps give the underwriter a clear picture of what the business will be doing, its risk management processes, revenues etc. It is very important that all of the information is provided otherwise the application may be rejected by Insurers. Please contact us to discuss your requirements.

What is the insurance 'rate'?

The insurance 'rate' is the percentage of fee income or turnover an underwriter requires to provide the insurance cover. It is decided upon by using the usual risk factors including type of profession (surveyor, engineering, architecture etc), the breakdown of activities, any prior claims etc. to calculate the 'rate'. This is then applied as a percentage to a firms rateable fee income or turnover. For example, if an underwriter decide they require a rate of 1% to insure a survey firm with a fee income of £ 100,000, the annual premium quoted will be £ 1,000 (net of insurance tax).

Getting a professional indemnity insurance quote

RICS recommends that all members should take specialist advice on professional indemnity insurance, so almost all firms use a specialist broker. A broker lowers the premium cost as well as providing valuable advice and support throughout the insurance period, especially on claims. For a quotation or some free advice please contact us. You can complete a Quote Request form or call us on 0345 251 4000.

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How is the premium calculated?

The rating of a RICS firm or any professional indemnity risk is a complex process. Underwriters need to be highly skilled and will require a significant amount of information to enable them to provide a quotation which accurately reflects the risk they are pricing. Premiums are based on many different factors including:

  • Size of the firm (fee income)
  • Type of work being undertaken
  • Claims history
  • Number of partners or directors and staff ratios
  • Experience

To assess the risk, the underwriter will require a fully completed proposal form which they will consider in detail. They will also look at the firm's website, or they may look even deeper into a firms background including Companies House and any online reviews.

The marketplace for Chartered Surveyors professional indemnity insurance

Professional indemnity insurance for the profession is estimated to be worth in the region of £ 100 million of premium income to the insurance market. This is paid for by the 10,000+ firms practising in the UK. Firms vary dramatically in size – from sole practitioners through to huge global practices.

Market distribution is heavily dominated by brokers who arrange PII on behalf of almost all RICS member firms, with only a small number of firms arranging cover direct with insurers. Like any market, you'll find the good, bad and ugly so if you want some good advice about which insurers are best suited for your firm, please contact us anytime.

Over the years, professional negligence claims against surveyors have been driven heavily by the property market cycle - for example, it is estimated that the crash in house prices in 2008 led to subsequent professional indemnity claims against the profession well in excess of £ 100 million.

So with some property experts now talking about another crash being overdue, what lies ahead for surveyors professional indemnity insurance?

Examples of professional indemnity claims for Chartered Surveyors

Professional negligence claims against Chartered Surveyors are surprisingly common in the modern world – it ‘goes with the territory’ when working within the land and property sector. Claims can be extremely costly, even when the Surveyor is not at fault.

We’ve selected some examples of professional indemnity insurance claims we feel many Chartered Surveyors can relate to, whether they are a small firm or larger practice;

Who are the main insurers?

There are approximately 30 insurers currently underwriting in the surveyors PI market. This provides healthy competition and many options for most RICS firms. However, the number of insurers reduces significantly where a firm has exposure to higher risk work such as survey and valuation.

Most insurance companies only accept quotation requests through their network of insurance brokers. We have access to many of the leading insurance companies active in the surveyors professional indemnity insurance market.

What is the assigned risks pool?

The Assigned Risks Pool (ARP) is a facility put in place by the Royal Institute of Chartered Surveyors to provide temporary cover for their members' firms who are unable to secure compliant professional indemnity insurance in the open market. There could be a variety of reasons why a firm is unable to obtain PI insurance. It will normally be because they have become a 'distressed risk' due to claims problems and no insurance company wants to insure them.

We assist accountancy firms who have found it necessary to enter the ARP and are now looking to return to find professional indemnity insurance in the open market.

Creating the right Impression

illustrating the importance of creating a good impression

The presentation of your business to insurers is more important than you may think. It will influence the prospective insurer's perception of your business and if the information is badly represented this could influence both their judgement and the premium they offer.

Quite simply, they are considering the risk, or not, that your business may pose to them. Ensure all information is clearly provided, along with the relevant promotional materials such as corporate brochure and website details as appropriate.

How much cover do I need?

RICS rules require the following minimum levels of cover, based on the firm's fee income:

  • £ 100,000 or less requires a minimum £ 250,000 limit of indemnity
  • £ 100,001 to £ 200,000 requires a minimum £ 500,000 limit of indemnity
  • Over £ 200,000 requires a minimum £ 1,000,000 limit of indemnity

You can also read our guidance note Your Limit of Indemnity which tells you about other factors you need to consider in addition to the mandatory requirements.

What work is considered high risk?

All professional work carries some risk and for the surveying profession this can vary considerably depending on the area you work in. The list below gives an indication of where the majority of professional indemnity claims come from in your profession:

  1. Low-Risk Quantity surveying, estate agency and lettings, planning and development.
  2. Medium-Risk Building surveys, commercial property management, rent reviews, lease renewals, architectural design.
  3. High-Risk Project management, residential surveys and valuations, commercial surveys and valuations.

Always read the policy documents!

reading glasses to illustrate the importance of reading an insurance policy

Reading the insurance policy is an obvious necessity for any policyholder and yet it's surprising how often businesses find that they claim on an insurance policy and then discover the cover isn't as they expected because they didn't read their policy.

Firms must always ensure that they have read and understand completely the terms of their professional indemnity policy. If any points are unclear, you should clarify these points with your broker.

Buying cover online

Professional indemnity is complex commercial insurance. When arranging this cover, most firms will require some level of advice and tailoring of their policy to ensure it provides exactly the right protection for their business. This may be a small tweak to the policy or something more substantial.....important things that matter when a claim occurs. Therefore, buying this type of commercial insurance online is not recommended and specialist advice from a broker should always be obtained.

Trading without professional indemnity insurance

Not a good idea! Trading without adequate professional indemnity insurance is a serious breach of regulatory requirements as well as poor business practice. A firm will be prevented from trading and closed down if they cannot obtain adequate cover.

 

This guidance note is intended for information purposes only. It is not and does not purport to be legal advice or specific insurance advice. Whilst all care has been taken to ensure its accuracy at the time of writing it is not to be regarded as a substitute for specific advice. If you require specific advice, please contact your brokers or call us on 0345 251 4000. This guidance note shall not be reproduced in any form without our prior permission. © All copyright is owned by Professional Indemnity Insurance Brokers Ltd.