Chartered surveyors are one of the oldest established professions with the Royal Institution of Chartered Surveyors being founded in London in 1868. Today membership of the RICS is one of the most prestigious positions in the property market.
It is a profession where negligence claims have largely been driven by the property market cycle - for example it is estimated that the crash in 2008 led to subsequent professional indemnity claims against the profession of well in excess of £ 100 million.
Rates and market capacity for the profession can therefore be extremely volatile, so it's important to have some understanding of how the market works to be able to make an informed decision on which product is best for your firm.
Please take some time to read this guide and if you don't find what you are looking for call us on 0345 251 4000 and we'll be pleased to help.
The marketplace for Chartered Surveyors professional indemnity insurance
Professional indemnity insurance for the profession is estimated to be worth in the region of £ 60 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.
The cost of professional indemnity insurance for Chartered Surveyors
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 companies starting point for insuring a risk and can vary significantly. For example, a minimum premium for an RICS member firm could be £ 500 or £ 1,000 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.
How is the premium calculated?
The rating of an 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
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.
There are approximately 30 insurers currently underwriting in the surveyors PI market. This provides healthy competition and many options for most RICS firms, although the number of insurers reduces significantly where a firm has exposure to higher risk work such as survey and valuation.
Buying a PI Policy
The RICS recommends that all of their members should take specialist advice on professional indemnity insurance and 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 free advice call us on 0345 251 4000. Also read our guide Why You Need An Insurance Broker.
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 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.
Create the right 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 therefore if 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.
Level of indemnity required
The RICS rules require minimum levels of indemnity (cover) which is based on the firm's fee income:
- Turnover £ 100,000 or less = £ 250,000 limit of indemnity
- £ 100,001 to £ 200,000 = £ 500,000 limit of indemnity
- Over £ 200,000 = £ 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 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 Quantity surveying, estate agency and lettings, planning and development.
- Medium Risk Building surveys, commercial property management, rent reviews, lease renewals, architectural design.
- High Risk Project management, residential surveys and valuations, commercial surveys and valutations.
Buying online is quick and simple with our quote and buy system that offers competitive premiums with the major insurers. Some surveyors will be able to obtain very competitive quotations using our on line system but this typically works best for low risk surveyors with a fee income up to £ 100,000. If your income exceeds this or your risk is more complex (claims, survey and valutation work etc) you'll need our broking service. Read our guide Why You Need an Insurance Broker.
Trading without professional indemnity insurance
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 can-not obtain adequate cover.
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. © 2018 Professional Indemnity Insurance Brokers Ltd