Professional negligence claims against architects are common and can be extremely costly, even when the architect is not at fault.
The insurance market for architects' professional indemnity insurance is large, with many insurers and their brokers battling for market share. They all offer policies at different premiums and with subtle but important differences.
So it's important to have some understanding of how this market works to be able to make an informed decision on which product is best for your firm.
Whether you are a new-start firm or already buying professional indemnity insurance, our guide covers the following key points:
- How much does it cost
- Getting the best quote and cover
- How is the premium calculated
- Level of cover required
- The PI marketplace for Architects
- Do good impressions count?
- Examples of low, medium and high risk work
- Buying online
- Why us
In normal market conditions, rates for architects' professional indemnity insurance typically range between .5% and 3% of fee income, depending on the usual risk factors and market competition. Rates can also be higher or lower than this depending on the work undertaken, the claims history etc. Rates are discounted for new start firms as there is no history or legacy to insure.
You should also bear in mind that minimum premiums will also apply which can vary considerably between insurers. For example, a minimum premium for an architect could be £500 or £1,000, depending on the insurer selected. The minimum premium is the insurance company's starting premium for insuring any risk.
If you stop trading, you may be required by your regulator to carry run-off insurance which is usually a multiple of the annual premium.
It's not good practice to buy architects' 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.
Architects' professional indemnity insurance is usually purchased from a specialist broker. A good broker lowers the premium cost as well as providing valuable advice and support throughout the insurance period, especially on claims. We provide this service, so for a quotation or some free advice please contact us.
The rating of an architect or any professional indemnity risk is a complex process. Underwriters need to be highly skilled and require a significant amount of information to enable them to provide a quotation which accurately reflects the risk they are pricing. Premiums are calculated based on many factors which will include:
- The claims history
- The size of the practice
- Qualifications and experience
- Categories of work undertaken
- The number of partners or directors to staff ratios
- Firm’s fee income
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 even look deeper online into a firm's background.
The Architects Registration Board (ARB) rules require a minimum limit of indemnity of £250,000 for each and every claim. The cover must be written on a civil liability basis; i.e. it covers all civil liability not just negligence.
But deciding on an adequate level of cover for your business is not an exact science, so we have put together a guidance note to help you in assessing the correct level of cover for your company. Please download a copy of our guide on the Limit of Indemnity.
In terms of premium value, architects' professional indemnity is estimated to be worth in the region of £ 50 million of premium income to the insurance market. This is for the 'primary' insurance cover and a further £ 10 million comes from excess layer or 'top-up' cover. This is paid for by the 5,000 firms practising in the UK who generate £ 4 billion in fee revenue. The RIBA recommends that all of their members should take specialist advice on professional indemnity insurance and this recommendation is made for a very good reason.
Since 2019, the insurance market for the construction sector has been seen as 'hard'. Premiums have risen and compliant cover has been more difficult to obtain and Architects and Engineers in particular, have been heavily affected. More information about the hard insurance market (and minimising it's impact!) is available in our Guide to the Hard Insurance Market.
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 therefore if the information is badly represented, this could influence both their judgement and the premium you pay. Quite simply, they are considering the risks that your business may pose.
Ensure that all of your information is clear and supply this to them with any brochures your provide and details of your website. It all goes to create the best impression of your business. Read our guidance on Risk Presentation.
All the professional work carries some risk and for architects this can vary considerably dependent 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:
- Low risk - town planning, feasibility studies, interior design.
- Medium Risk - architectural design
- High Risk - new build architectural work, project management, basements
Buying online is quick and simple with our quote and buy engine that offers cover ONLY from A-rated insurers. Some architects will be able to obtain very competitive quotations using our on line system. This typically works well for low risk architects with no previous claims.
We have a wealth of experience in arranging professional indemnity insurance for Architects and Designers. With over 30 years' market experience we have the level of understanding necessary to represent your firm professionally and confidentially in discussions and negotiations with insurers. Many architects rely on us to arrange robust PI insurance companies to protect their business and their hard earned reputations. We only use 'A' rated insurance companies to deliver long term insurance and stability and reliability,as well as value.
We are independent and not tied to to any schemes or insurers, so you can be sure that any advice is impartial. Like you we are highly professional and we don't annoy firms with calls from pushy sales people.
For more information about this subject or a discussion with one of our experts, please call us on 0345 251 4000.
This guidance note is intended for information purposes only. Whilst all care has been taken to ensure the accuracy of the guidance note it is not to be regarded as a substitute for specific advice. This guidance note shall not be reproduced in any form without our prior permission. © Professional Indemnity Insurance Brokers Ltd