Professional Indemnity Insurance
Proposal for
A c c o u n t a n t s
A c c o u n t a n t s
A c c o u n t a n t s
A c c o u n t a n t s
2nd Floor John Stow House
18 Bevis Marks London EC3A 7JB
Tel – 020 7623 4957 Fax – 020 7623 4958
Kerry London Ltd, Professional Risks,
2nd Floor, John Stow House, 18 Bevis Marks, London EC3A 7JB
______________________________________________________________________________________________________
Professional Indemnity Insurance
Proposal for
Accountants
This proposal form must be completed in black ink by a Partner, Principal or Director of the Company. All questions must be answered to enable a quotation to be given but the completion and signature of this proposal does not bind you or the Underwriters to enter into a Contract of Insurance. If there is insufficient space to answer any question fully, please attach a signed and dated continuation sheet.
If you have a brochure, please provide a copy as well as any standard contract terms, conditions, agreements or letters of appointment which you have with your clients.
PLEASE TYPE OR CLEARLY PRINT YOUR ANSWERS IN BLACK INK TO ASSIST THE UNDERWRITERS' CONSIDERATION OF THE PROPOSAL
Section 1 – Your Company and Staff Details
a) Name of Individual or Company(s) (‘You’) including any Subsidiary Companies for whom cover is required: a) b) c) Date Established: Date Established: Date Established: b) Address of all offices, including those of any overseas local offices or representatives:
Address Name of Partner, Principal or Director
responsible Registered or principal office
Second location (if any)
Third location (if any)
c) Name(s) of any previous company(s) requiring cover and details of the nature of work undertaken:
d) Please provide details of all Partners, Principals or Directors: Names of all Partners,
Principals or Directors
Age Qualifications Date(s) Qualified No of years with this
Company
Please attach a C.V for any Partner, Principal or Director with less than 5 years experience in this occupation.
e) Please provide details of all full-time and part-time Consultants who are under a contract of service with you:
Name of all Consultants Age Qualifications Date(s) Qualified No of years with you
If less than 5 years experience in this occupation, please provide details of previous occupations:
f) Is cover required for any Partner in respect of liability arising out of a previous business? YES/NO If ‘YES’, please give details:
Name Name of
previous firm
Nature of firm’s business
Date Partner left the previous firm and the reason for leaving
g) Are you admitted to membership of any Association or Professional Body? YES/NO If ‘YES’ please give details:
h) Have you or any person employed by you ever been subject to disciplinary proceedings by any Professional
Body? YES/NO
i) Please state the total number of:- a) Partners, Principals or Directors b) Other Qualified staff
c) Other Technical staff (excluding Administrative staff) d) Administrative and all other staff
TOTAL
j) How do you ensure that you and your staff keep up to date with changes in legislation and other legal developments which affect the type of work you do and the services you offer? Please provide details:
k) If you are a sole principal, please provide details of the arrangements for office supervision during your absence:
l) Do you work to a professional code of practice? YES/NO m) Do you have written checklists and/or work procedures for the services which you provide? YES/NO n) Do you have standard contract terms and conditions which you use in every case? YES/NO
If ‘YES’, please provide us with copies.
If ‘NO’, please explain why and detail the alternative methods you use to confirm terms of engagement with your clients:
o) Are you accredited, or in the process of being accredited, to any BS or similar Quality Assurance standard?
YES/NO
If ‘YES’, please provide details:
Section 2 – Companies with whom you are associated
a) Do you undertake work for any partnership, company or organisation in which any Partner, Principal, Director or Employee holds a position whereby he/she is able to make major decisions on behalf of such partnership,
b) Is any Partner, Principal or Director connected or associated (financially or otherwise) with any other practice,
company or organisation? YES/NO
If you have answered ‘YES’ to either of questions a) or b) please provide full details :
c) What percentage of your income is derived from the associated companies detailed above?
d) Is cover required for the work you undertake for the associated companies detailed above? (Cover is restricted
to claims made by independent third parties) YES/NO
e) Has any Partner, Principal or Director been a Partner, Principal or Director or been associated with any business which has ceased trading either voluntarily or compulsorily?
YES/NO
f) Has any Partner, Principal or Director been made personally bankrupt? YES/NO
If you have answered ‘YES’ to either of questions e) or f) please provide full details:
Section 3 – Your Activities
a) Please state your gross fees (including those paid to sub-contractors) for each of the last three financial years and an estimate for the next financial year in respect of fees billed to clients based in the following territories:
Year UK Overseas excl.
USA & Canada
USA & Canada Total
200 to 200 200 to 200 200 to 200 Next
Financial Year Ending (eg 31/12): /
b) Do you enter into any contracts where legal jurisdiction is anything other than UK? YES/NO If you have declared fees from any territory other than the UK or answered ‘YES’ to Question b) please give full details including nature of contract, dates, countries involved, contract values and jurisdiction applicable:
c)
Financial Year 200 to 200 200 to 200 200 to 200
Largest total fee from any one client or group Average fee per client
d) Please indicate the approximate percentage split in your fees (including payments to sub-contractors) for each of the following categories:
Last Year Forthcoming Year
i) auditing a) of public companies b) of other clients
% %
% %
ii) preparation of accounts a) of public companies b) of other clients
% %
% %
iii) compliance taxation a) for public companies b) of other clients
% %
% %
iv) taxation consultancy % %
v) management consultancy % %
vi) computer consultancy (please give details below) % %
vii) insolvency, liquidations and receiverships % %
viii) executorships and trusteeships % %
ix) investment advice and other investment work % %
x) directorships % %
xi) company registrar work % %
xii) mergers, acquisitions and disposals % %
xiii) work for merchant banks, finance houses, hire purchase and credit sales organisations and other finance providers (excluding building societies)
% %
xiv) any other work % %
Total 100% 100%
e) Have you ever received fees in connection with any of the following? i) Private Client Portfolio Management
ii) Institutional Fund Management iii) Dealing in Securities
iv) Offshore Investments
v) Entertainment Industry YES/NO
If ‘YES’, please provide name(s) of client(s), when and which services were provided and the fees earned:
f) Are you or your company authorised to conduct investment work as defined in the Financial Services Act 1986?
YES/NO
If ‘YES’, please provide details: Authorising Body Category of
authorisation
Services provided Fees
applicable % %
g) Have you provided any advice in connection with Personal Pensions since 1988? YES/NO If ‘YES’, please provide details: (Please note that additional information may be required)
Gross commissions earned
No. of clients provided with Pensions advice
Average size of transfer value Number of complaints received 1988 to 1993 1994 to 1998 1999 to date
h) Have you provided any advice in connection with Low Cost Endowment Mortgages since 1987? YES/NO If ‘YES’, please provide details: (Please note that additional information may be required)
Number of policies sold
Highest loan value Average loan value Number of
complaints received 1987 to 1993
1994 to 1998 1999 to date
i) Have any major changes in your activities/structure taken place in the past twelve months or expected to take
place in the next 12 months? YES/NO
j) Is cover required for any previous, now ceased, activity which is different from that declared within this Proposal
Form? YES/NO
If you have answered ‘YES’ to questions i) or j) please provide full details:
k) Do you have systems in place to ensure that taxation deadlines are met? YES/NO If ‘NO’, please explain why:
l) During the last 12 months have any clients terminated or discontinued your services to them? YES/NO If ‘YES’, please provide full details:
n) Do you want us to provide cover to independent accountants under your policy for claims made against them in
respect of work they perform on your behalf? YES/NO
(Note: Your vicarious liability for the actions of sub-contractors employed by you is covered automatically) If ‘YES’, please provide full details:
Name Qualifications Work undertaken Fees paid
(last financial year)
o) How do you control and review the work that independent accountants undertake for you?
p) Do you enter into written agreements with your independent accountants? YES/NO q) Are independent accountants undertaking work for you required to hold their own Professional Indemnity
Insurance and if so, for what amount?
YES/NO
r) What do you think are the most significant risks associated with your activities and what do you do to minimise your exposure to them?
Section 4 – Your Professional Indemnity Insurance arrangements
a) Please provide details of your current insurance. You need not answer this question if you are currently insured through Kerry London Ltd.
If you are not currently insured, please state ‘Not Insured’..
Insurer Renewa l Date Limit of Indemnity (Any One Claim/Aggregate) Premium (excl IPT) Excess Retroactive Date
b) For how long have you been continuously insured? Years £
c) Has any Insurer ever:-
i) declined to offer Insurance to you or any Partner, Principal or Director? YES/NO ii) imposed any special terms on your Company or any Partner, Principal or Director? YES/NO iii) cancelled or voided an Insurance for you or any Partner, Principal or Director? YES/NO If you have answered ‘YES’ to any of these questions please provide full details:
d) What Limit of Indemnity do you now require? Please indicate by ticking the box(es) below: £100,000 £250,000 £500,000 £1,000,000 Other Please state
e) An excess of at least £500 to £1000 will normally be a requirement of this insurance. However, a reduction in premium may be available if you are prepared to accept a higher, voluntary excess (each and every claim). If you are prepared to consider this, please state the amount of the excess you require our quotation to be based upon.
£2,500 £5,000 £10,000 £25,000 Other Please state
Section 5 –Your Systems for dealing with money
a) Do you always obtain satisfactory written references when engaging senior employees? YES/NO
b) Are you able to confirm that no Partner, Principal, Director or Employee is allowed to sign cheques on his/her
signature alone? YES/NO
c) Are Employees who receive cash/cheques in the course of their duties required to pay in daily? YES/NO
If you have answered ‘NO’ to any of the above please explain why by giving full details:
d) How often are checks carried out on all entries in the Cash Book with all paying in books, receipts counterfoils and vouchers being reconciled with Bank Statements, including the balance of cash and unpresented cheques, independently of Employees receiving or banking monies belonging to you as well as in trust on behalf of
others?
WEEKLY/MONTHLY/QUARTERLY/OTHER
£
Section 6 – Your Claims history
CLAIMS- PLEASE NOTE IT IS IMPERATIVE TO ANSWER THESE QUESTIONS CORRECTLY -FAILURE TO DO SO COULD PREJUDICE YOUR RIGHTS - IF SPACE IS INSUFFICIENT PLEASE ATTACH A SIGNED AND DATED CONTINUATION SHEET TO ENABLE YOU TO PROVIDE FULL DETAILS.
a) Fidelity
i) Have you sustained any loss through the fraud or dishonesty of any person? YES/NO
ii) Do you know of any fraud or dishonesty at any time of any past or present Partner, Principal, Director or
Employee? YES/NO
b) Professional Indemnity:-
i) Has any claim, whether successful or not, ever been made against you, your predecessors in business or
any past or present Partner, Principal, Director or Employee? YES/NO
ii) Are you or any of the Partners, Principals, Directors or Employees AFTER FULL ENQUIRY, aware of any circumstances which may give rise to a claim against you, your predecessors in business or any past or
present Partner, Principal, Director or Employee? YES/NO
If you have answered ‘YES’ to any of the Claims Questions please provide full details including dates, amounts involved, brief details of the nature of the claim, whether the claim is paid or still outstanding and state the steps taken to prevent a reoccurrence.
Additional Information
Please use this space to provide additional information in support of the answers given within the proposal form or simply to provide further details about you or your activities which you feel would be of interest to us.
IMPORTANT NOTICE CONCERNING DISCLOSURE
It is your duty to disclose all material facts to Underwriters. A material fact is one which may influence an Underwriter’s judgement in the consideration of your proposal. If your proposal is a renewal, it is likely that any change in facts previously advised to Underwriters will be material and such changes should he highlighted. If you are in any doubt as to whether a fact is material you should disclose it.
FAILURE TO DISCLOSE could prejudice your rights to recover in the event of a claim or allow Underwriters to void the policy.
I/We declare that the statements and particulars contained in the proposal are true and that I/we have not mis-stated or suppressed any material facts. l/we agree that this proposal together with any other information supplied by me/us shall form the basis of any contract of insurance effected thereon. I/we undertake to inform Underwriters of any material alteration to these facts occurring before completion of the contract of insurance.
E.U. Disclosure Clause (UK)
Notice to the Proposed/Assured
The parties are free to choose the law applicable to this Insurance Contract. Unless specifically agreed to the contrary, this insurance shall be subject to English Law.
Any enquiry or complaint should be addressed in the first instance to your Broker.
Kerry London Ltd
2nd Floor John Stow House 18 Bevis Marks London EC3A 7JB
Tel: 020 7623 4957 Fax: 020 7623 4958 Registered in England No. 2006558
Authorised and regulated by the Financial Conduct Authority
A COPY OF THIS PROPOSAL SHOULD BE RETAINED BY YOU FOR YOUR OWN RECORDS
_____________________________________________________ Date: ________________________
Kerry London Ltd, Professional Risks,
2nd Floor, John Stow House, 18 Bevis Marks, London EC3A 7JB
USEFUL CHECKLIST FOR THE ACCOUNTANTS PROPOSAL FORM
When completing the proposal form please just take a minute to check the following points have been taken into consideration. This will assist us in providing you with an expedient and competitive quotation.
•
(Section 1
– Your Company and Staff Details) Ensure that all of the companies trading titles that
require coverage are clearly shown under this section. Please pay particular attention to parts (c) &
(f) of this question; these parts must be completed for coverage that is required for past trading
practices. Failure to complete this section correctly may cause severe problems in the event of a
claim.
•
(Section 3 – Your Activities) Part (d) of this section holds the key to Insurers premium calculations
so extra care should be taken when completing this question. Please ensure that this question adds
up to 100%.
•
(
Section 4 – Your Professional Indemnity Insurance arrangements) Please clearly indicate what limits and excesses need quoting for. If you are unsure what limits or excesses are required please refer to our ‘Information for Accountants’– Section4. Main Bodies with PI Rules (as attached)•
(Section 6 – Your Claims history)Please ensure that all claims information is provided for both
present and past claims matters. This means any claim and/or circumstance that may lead to a claim
should be clearly shown within the proposal form or on separate sheet of letter headed paper.
•
The proposal form must be signed and dated by a company director, partner or principle.
Please note: This application form has been designed for businesses that have been trading for more than 12 months. If your practice has not been trading for 12 months please try to answer the questions that will reflect your companies proposed activities for the next 12 months.
If you are ever unsure what information is required from you when completing this form please
ensure that you contact your broker immediately.
INFORMATION ON
PROFESSIONAL INDEMNITY INSURANCE
FOR
A c c o u n t a n t s
A c c o u n t a n t s
A c c o u n t a n t s
A c c o u n t a n t s
- CONTENTS -
1. Introduction
2. What are the Insurers main concerns?
3. Types of Claim
4. Main Bodies with PI Rules
5. Pitfalls to look out for when arranging cover.
6. Policy Wordings
7. Coverage that is normally afforded
8. Exclusions that usually apply
1. Introduction
Accountancy is one of the more established professions. However it is fairly fragmented; being made up of members from a number of professional bodies as well as unqualified but highly experienced advisors, such as former tax inspectors.
Firms can vary dramatically in size and services, from small sole practitioners through to huge international practices. Some of the professional bodies maintain rules for mandatory PI cover.
2. What are the Insurers main concerns?
First and foremost, Insurers are concerned with qualifications and/or experience. If an Accountant is unqualified then insurers will want to see a CV, normally demonstrating at least five years' practical experience and maybe more depending on the services being offered.
Insurers will be particularly interested in what type of work the proposer is undertaking and the proposal forms bring this out by asking for a breakdown of the respective fee income.
Insurers tend to base most their Underwriting decisions on the actual fields of work that the Accountant gets involved in. Here is a guide to most of the main fields of work:
Audit, accountancy and company tax for quoted companies. This area of work is perceived by Insurers
as highly hazardous, particularly when dealing with large financial institutions. The reporting requirements are far greater and can be in the public eye. The scope and size of potential claimants is large and losses can therefore be catastrophic.
Other audit and accountancy (including related tax work). Insurers deem this work to be a standard
hazard.
Personal taxation. Again Insurers perceive this work to be a standard hazard. It can sometimes become
complex in certain areas, i.e. members of Lloyd's, entertainment industry, etc.
Corporate taxation. This is seen by Insurers to be more hazardous than personal taxation it just depends
upon exact nature of work.
Management consultancy. At strategic level can be very low hazard. At the level of interim management or
IT consultancy can be more hazardous.
Insolvencies, liquidations and receiverships. Insurers see this area of work as highly hazardous. Every
project can present a potential problem due to the very nature of the work. Creditors can also be very aggressive and problematical by regularly asking questions of the Accountants.
General Insurance commissions. Generally this is seen as low hazard as most Accountants do not get
involved in insurance broking to any significant extent. This is now especially true that all General Insurance is regulated by the FSA. This will preclude most Accountants from giving any advice as they are not likely authorized to do so.
Commissions from investment business regulated under Financial Services Act. The exposures in this
area to Insurers are variable dependent on the work that has been undertaken. If the Accountants are acting as merely introducers then the exposures are low. However if financial advice is given directly by the
Accountant then substantial losses could arise given the problems this area of work has seen in the past.
Mergers, acquisitions, disposals. This is another area of work that Insurers see as being highly
Overseas business for any of the above activities can be an issue, particularly for larger firms.
Most firms of Accountants remain partnerships. There has been much consolidation in the accountancy world in recent years, some of it traumatic. This means that there are many people with a need to cover liability arising from former practices. This needs to be addressed carefully, not just from the perspective of getting the right cover in place (due to the 'claims made' basis of PI policies) but also from the perspective of looking at former practices' claims records.
And finally there is the claims record. Accountants' claims records vary enormously. Many small firms are entirely clean. Most large firms have experienced at least some claims. But beware, there are a number of 'serial killers' with terrible claims experiences.
3.
Types of Claim
Personal taxation. Failure to lodge tax returns led to client losing tax repayment and interest. Cost £14,000. Personal taxation/pensions. Incorrect advice as regards pension payments and alleged concealment of commissions. Cost £675,000.
Accountancy. Lender sought reference for a business's mortgage. The business failed and the subsequent property sale failed to cover the loan. Cost £180,000.
Trust. Two partners were trustees to a family trust. They delegated investment authority to a company that subsequently collapsed. They also failed to minimise tax. Cost £125,000.
Company tax. The firm, who acted as accountants to a profitable company, introduced them to a tax mitigation consultancy. Schemes of tax mitigation were embarked upon that proved to be fraudulent from a tax perspective. Cost £130,000.
Auditing. The firm failed to spot a serious fraud due to inadequate audit procedures. The cost exceeded the limit of indemnity of £1,000,000.
Investment advice. Poor investment advice led to serious loss to a trust. Cost £210,000.
Accountancy. The firm acted for the purchaser of a business. There was confusion as to their role. The purchaser thought that the firm was looking at the commercial viability of the acquisition. The firm thought that their instructions were limited to the preparation of cash flow forecasts based on given information for the purpose of raising finance. Cost £180,000.
Fraud. A partner in the firm stole clients' money. Cost £625,000. Insolvency. Failure to realise full value of assets. Cost £110,000
4. Main Bodies with PI Rules
• The Institute of Chartered Accountants in England & Wales (ICAEW).
• The Institute of Chartered Accountants of Scotland (ICAS).
• The Institute of Chartered Accountants in Ireland (ICAI).
• The Association of Chartered Certified Accountants (ACCA).
• The Chartered Institute of Taxation (CIOT).
The main features of their various rules are:
ICA
Required Limit of Indemnity
• Two and a half times the firm's gross fee income for past financial year, subject to a minimum of £50,000 for a sole practitioner or £100,000 in any other case and a maximum of £1,000,000 (of course firms can be recommended to buy much more!).
Maximum Excess
• Sole practitioners - £20,000 in the aggregate. Partnerships - £20,000 in the aggregate multiplied by the number of principals. Corporate practices - £20,000 in the aggregate or the total amount
accepted by the principal as a legally binding personal obligation (but not more than £20,000 for any one principal).
Main features of rules
• Cover to be provided via an insurer from the 'List of participating Insurers' published each year by the Institute.
• Cover must conform to the Institute 'approved wording' - a 'difference in conditions' clause must be included where cover differs.
• Retroactive cover of 6 years or establishment date of practice must be provided.
• An 'Assigned risk pool' exists for those practices unable to obtain cover.
• Run-off cover following cessation must be maintained for 2 years, but it is recommended that run-off is continued for 6 years.
ACCA
Required Limit of Indemnity
• Fee income less/equal to £200,000 - the greater of two and a half times the firm's total income for past financial year and 25 times largest fee paid in past financial year, subject to a minimum of £50,000.
• Fee income £200,000-£700,000 - the greater of the aggregate of £300,000 and the firm's total income for past financial year and 25 times largest fee paid in past financial year.
• Fee income over £700,000 - the greater of £1,000,000 and 25 times the largest fee paid in past financial year.
Maximum Excess
• The lesser of 2% of the limit of indemnity in respect of each and every claim or £20,000 per principal.
Main features of rules
• Cover to be provided by 'reputable' (DTI approved) insurers.
• Cover to be on a 'civil liability' basis for each and every claim.
• Fidelity guarantee cover must be included for partners, directors and employees.
• Run-off cover following cessation of practice must be maintained for 6 years.
CIOT
Required Limit of Indemnity
Maximum Excess
• The lower of £20,000 per principal in the aggregate or 2% of the limit of indemnity.
Main features of rules
• Cover to be provided by any EU insurers authorised by law.
• Cover to be for all 'civil liability' incurred in connection with the conduct of the business.
• Fidelity guarantee cover is 'recommended' but not compulsory.
• Run-off cover following cessation must be maintained for at least 6 years.
• Firms regulated by certain other professional bodies may be exempt from the CIOT PI requirements.
5. Pitfalls to look out for when arranging cover.
Firstly, know your client. What do they do? Are they particularly exposed in hazardous areas? If they are, obtaining satisfactory terms might take longer. Make sure that their professional body's rules (if any) are complied with.
Predecessors/former practices. As mentioned earlier, be sure that any cover needed is included. There
are many short proposal forms in use these days. These are only short because they omit questions. Often, the first questions to go are those relating to retroactive exposure. So, not all proposal forms will elicit this important detail.
Sub-contracted work. It is common for self-employed Accountants to help firms out occasionally. The firm
may agree to take responsibility for that work and, so long as it is adequately supervised, insurers are generally willing to deem these people to be employees and waive rights of subrogation. Again, good proposal forms will bring this requirement out but short forms might not. Be sure to ask.
Unusually large clients. If more than 20% of fees derive from one client, insurers may want more
information. You should be prepared for this.
Staff dishonesty. Many Accountants' policies include in-house fidelity and liability for dishonesty of
employees. This is why most proposal forms ask questions relating to this. Insurers will expect to see written references taken and no sole-signature cheques (except in the case of sole practitioners).
6. Policy Wordings
As mentioned earlier, wordings are often required to be written on a 'civil liability' basis (covering all civil liability, not just negligence), or on a minimum approved wording, often including fidelity coverage. If the insured is unqualified, or qualified only to a limited extent, more basic miscellaneous wordings can be offered.
7. Coverage that is normally afforded
Usually the limit of indemnity will be 'any one claim' with legal costs in addition. The excess will not normally apply to insurers' costs and expenses. Being on a civil liability basis, unless specifically excluded (which is unusual) cover would include negligence, liability for dishonesty, liability for lost documents, libel and
offers at least the same cover as the minimum standard required. Cover operates for all the activities that would be expected of an Accountant, including personal appointments, such as directorships, as liquidator, as trustee, but only in respect of an Accountant's usual services.
Civil liability policies demand careful attention to exclusions so that non-PI exposures are not inadvertently covered. Typically, policies will exclude:
• Death or bodily injury.
• Loss or damage to physical property (but fidelity and loss of documents are covered).
• Punitive or exemplary damages (many policies have no geographical or jurisdiction limitations).
• North American offices.
• Liability to other insureds.
• Nuclear risks.
• Claims and circumstances known at inception of the cover.
8. Exclusions that usually apply
• Fidelity.
• Loss of documents.
• Costs of representation at tribunals.
9. Associated Links
The Institute of Chartered Accountants of Scotland (ICAS)
The ICAS received its Royal Charter in 1854 and is the oldest professional body of accountants in the world.
Chartered Institute of Taxation (CIOT)
The CIOT is the senior professional body in the UK concerned solely with all aspects of taxation.
The Institute of Chartered Accountants in England & Wales (ICAEW)
The Institute of Chartered Accountants in England & Wales is the largest professional accountancy body in Europe, with over 120,000 members.
Institute of Chartered Accountants in Ireland (ICAI)
Incorporated by Royal Charter on 14 May 1888, the ICAI is the oldest and largest body of accountants in Ireland.
Association of Accounting Technicians (AAT)
Formed in 1980. The AAT is the professional body for Accounting Technicians, with more than 100,000 Members and Students worldwide.
The Association of Chartered Certified Accountants (ACCA)
The ACCA is a professional body that represents Certified Accountants.
Accountancy Age
On-line UK leading accountancy magazine.
Financial Director
