What's the Cost of Professional Indemnity Insurance for Accountants?

Professional indemnity insurance rates for accountants can be highly variable, ranging from £134 a year to 10X that amount or more. As a result accountants, whether non chartered or chartered, can be quite surprised at the difficulty in finding cheap PII quotes, so here's some information on professional indemnity costs to help you spot a good deal when you find one.

Average Cost Data for Accountant Professional Indemnity Insurance

The cost of professional indemnity insurance (PII) for an accountancy business starts from around £134 a year for a cheap quote for basic accounting work, but can quickly rise to over £1,000 a year for higher levels of cover when buying from insurers at the upper end of the range. And accountants involved in riskier types of work can pay even higher premiums.

To illustrate the variability in costs for accountant PII, we recently ran some sample quotes through a large provider of PII insurance in the UK. We found that prices can vary by 7X or more for the same accountant profile from one insurance provider to another.

Not surprisingly, premiums go up with coverage limits. In the examples below, the £100K of PII coverage is for a small accountant business with just £40,000 of total fees per year. The £250K PII limit is for a slightly larger business with £100,000 of total fee volume. As you can see, the premiums rise with the limit of insurance. And there's a wide gap between quotes from different insurers. And prices would continue to climb for accountants earning higher annual fees. These limits are in line with minimum requirements for ICAEW chartered accountants.

One reason for high PII rates is that chartered accountants can only buy qualifying insurance, which limits the number of insurers available to quote.

What factors affect the cost of accountant PII?

PI insurance rates for an accountancy business depend on lots of different factors, with your total annual fee volume and the size of your largest fee (e.g., from one client) being primary factors. What else plays a role in the quotes you receive for PII? Let's take a look.

Fee volume. As discussed in our in-depth guide to accountant insurance, a business's annual fees and largest contract fee determine how much accountant PII insurance you need, assuming you're a chartered accountant. And the higher your limits of insurance, the more expensive the PII premium will be. Higher fees mean higher limits of insurance, which translate into more risk for an insurer and therefore a higher premium.

Type of accountancy work. The type of work you do also has a bearing on premiums, as well as the number of insurers willing to insure an accountant. For example, for our sample test case we found that a major UK insurer quoted for an accountant involved in audit work, general accountancy, payroll and personal tax consultancy—but wouldn't offer a quote for an accountant performing secretarial work or share registrations. Accountants involved in tax planning schemes will find it harder to get insurance, too.

Previous claims history. Businesses with a history of claims will pay more than businesses that haven't needed to claim.

The insurer. Premiums can be vastly different from one insurer to the next, which is not surprising because of the specialist risks involved. Insurers with less appetite for a certain risk profile (e.g., certain types of accountancy work) either won't offer a policy or may charge a significant amount more than alternative underwriters in the marketplace. For this reason, it's very important to compare the market when getting PII quotes. Brokers working with multiple underwriters can be useful, as can comparison sites.

Ultimately, the cost of insurance for an accountancy business depends on the risks involved. Quotes for your accountancy business might be significantly higher or lower, depending on how insurers calculate the risks involved. Underwriters each have proprietary, in-house risk models that use the details of an application to assess risk, so quotes can be highly variable from situation to situation.

How to Save Money on Accountancy Insurance

As with any type of insurance, accountants looking to save money on their PII should compare the market. There are additional ways to try to save as well. Here are a few:

Check the market. As you can see from the data we gathered above, accountant PII premiums are highly variable from one insurance provider to the next. Because of this, it's critical to get quotes from multiple underwriters. Accountants who simply take the first quote they find could end up paying 7X more than necessary.

Be accurate disclosing the work you do. Underwriters price PII policies based on the work an accountant does, and the fees generated for this work. Don't overestimate the activities or your fees to avoid being overcharged. That said, be absolutely sure you don't underestimate them either or you risk your insurance being invalidated!

Limit of insurance. PII insurance premiums are higher for higher limits of cover. Make sure you get enough PII insurance, but on the other hand don't over insure yourself, either.

Pay annually. In most cases, if you want to pay your PII premium monthly then you'll be hit with a finance charge. This may be the only option for you if you can't afford to pay the premium upfront; but if you can afford the annual payment this typically works out around 20% cheaper in the long run.

Where Can I Get Accountant PII Quotes?

The PII market for accountants is specialised and there is a limited number of underwriters in the marketplace. You usually need a broker to access them, which isn't all bad because brokers can be very useful for helping you answer important questions like 'How much professional indemnity insurance do I need?' If you don't have a broker yet or want to compare prices with another broker, hopefully we can help. Click here, where you'll fill out a short form and quickly be connected with up to 5 accountant insurance companies and brokers to help you get the cover you need at the right price.

Methodology

We gathered quotes using an online quote system for a sole trader needing £100,000 and £250,000 of professional indemnity cover. The average figures displayed above reflect the average of the three cheapest quotes we could find. Quotes can vary significantly by line of work, business size, location and many other factors, so your PI insurance rates might vary significantly from the figures shown here.