Professional indemnity insurance (PII)
Professional indemnity insurance (PII) is a mandatory requirement for all AAT licensed members. This is for your own and your clients' protection in the event of professional negligence, as outlined in the Client care policy (PDF). Your cover must:
- include full civil liability cover
- be fully retroactive to cover losses that have already occurred but haven't yet been reported.
Minimum level of cover required
- Sole traders: the greater of either 2.5 times the firm's gross fee income or £50,000.
- Partnerships: the greater of 2.5 times the firm's gross fee income or £100,000.
- Limited companies: the greater of 2.5 times the firm's gross fee income or £100,000.
If your firm's gross fee income is greater than £400,000 the maximum level of cover required is £1,000,000.
You must set the self-insured excess at an amount you're able to meet at all times.
Monitoring and compliance requirements
You must:
- submit a licence annual declaration each year, in the format and by the means prescribed by AAT, confirming you have PII in place in accordance with the provisions of the Professional indemnity insurance policy (PDF)
- if you provide self-employed accountancy or bookkeeping services to clients through multiple firms, obtain PII cover for each entity that meets the requirements of the policy
- keep records of any insurance claims made under the policy and be prepared to provide further information to AAT or representatives of AAT on request at any time
- on request, make available to AAT and our representatives your firm’s PII certificate and insurance policy. Any failure to cooperate with AAT’s monitoring arrangements in respect of professional indemnity may lead to action in accordance with the Disciplinary Regulations (PDF) and/or Licensing Regulations (PDF).
Limited assurance engagements
If you're licensed to carry out limited assurance engagements you must ensure your PII covers limited assurance engagements and potential third-party claims.
Recommendations
These comments are for the personal consideration of members and are not made by AAT acting as an Introducer Appointed Representative of Parliament Hill, or aimed specifically at the policy arranged through Trafalgar Risk Management Limited.
Although we specify minimum cover requirements, you're strongly advised to do a risk assessment to determine a level of PII that's adequate for your practice. This should take into account the type of clients you have and the type of work you undertake.
If you cease your business as a licensed member we strongly recommend you maintain your PII for a minimum of six years after. PII policies are usually provided on a claims-made basis. You may not be covered where a claim is made against you for work carried out before your PII lapsed.
Certain types of client may have a particularly high likelihood for producing single claims for very large sums of money. For example, work for the entertainment industry, particularly work connected to films, has a tendency to produce very large claims.
Accountants who undertake critical work for a small number of clients are more likely to be involved in large cases than accountants who perform bits of work for a large number of clients.
You may be liable for work you do for free, for friends, family or charities. This can even include casual advice, so be careful when asked for your professional advice. Limit your liability: notify the client in writing at the start of the engagement that your advice will not be covered by PII.
If there's an issue relevant to your insurance level but the client is someone you're confident wouldn't make a claim, you should still increase it. It's unfair and unprofessional to deny them, on the grounds of family loyalty or friendship, the opportunity of recompense for an error you make.
Many claims can be avoided through carefully worded letters of engagement that lay out your specific responsibilities. Be careful to note if a condition of your insurance is that such letters are in place, as you might not be covered against claims where no such formal letter is in place.
You must inform your broker of potential claims immediately, and handle any potential claims in an appropriate manner in accordance with the guidance they give you. For example, you must not admit liability to a client unless your broker or insurers advise it: this may invalidate your policy.
If you represent clients in the aviation industry you need to check if you should register as an ATOL Reporting Accountant (ARA). If you do, your PII needs to cover your commitments as an ARA.
Special rates for AAT licensed members through Parliament Hill
If you're applying to become an AAT licensed member, you'll need your membership number to hand. If you're currently a licensed member you'll be required to enter your licence number or membership number in order to obtain a full quote (you can, however, obtain a quick quote indication without your licence number or membership number).
To obtain a full quote and to apply for cover, you'll need your AAT membership number, contact details and estimated turnover for the next 12 months.
Low turnover policy
- If your practice has an annual gross fee income of less than £8,000, you may be eligible for the AAT low turnover policy premium rate.*
- The low turnover professional indemnity only policy is available to AAT licensed members at a special online rate of £46.22.**
Price promise
As part of your AAT benefits package, Parliament Hill Ltd, in conjunction with Trafalgar Risk Management, offer AAT licensed members a price promise on PII if arranged through Trafalgar Risk Management.*
If within 14 days of purchase you find the same cover elsewhere for less, Trafalgar Risk Management will try to match the price, and Parliament Hill Ltd will send you a cheque for £50 (terms and conditions apply; see AAT Rewards for further information).
*This benefit is made available to AAT members through Parliament Hill Limited, 40 Gracechurch Street, London EC3V 0BT. AAT is an Introducer Appointed Representative of Parliament Hill Ltd who is authorised and regulated by the Financial Conduct Authority for non-investment insurance mediation only and their register number is 308448. Details can be checked on the Financial Services register https://fca.org.uk/register or by calling the FCA on 0800 111 6768. Insurance benefits are subject to underwriting criteria. A fee of up to £60 is built into the premiums charged. Neither Parliament Hill Ltd nor Trafalgar Insurance Company Limited are members of the same group.
**The low turnover policy is available to sole traders with a turnover of less than £8,000 per annum and professional indemnity cover of £50,000.
Get a quote
You can get a quote here, or call Parliament Hill Ltd on 0333 003 2982 for a quick quote indication. We're pleased to bring these offers to your attention, but please note that this does not constitute a recommendation from AAT. Other insurance providers can also offer professional indemnity insurance cover for AAT licensed members.
