What is Professional Indemnity Insurance (PII)?
Professional Indemnity Insurance (PII) covers you for civil liability claims arising from your work in private legal practice. These claims most commonly involve professional negligence.
Why is it important to hold PII?
Having appropriate PII in place is important because it:
- increases your financial security
- helps ensure that consumers do not suffer loss, which might otherwise be uncompensated
- maintains public confidence in the integrity and standing of entities regulated by us
Do I need PII?
If your entity is authorised and regulated by us, you are required to take out and maintain PII in accordance with the Professional Indemnity Insurance Rules.
Prior to authorisation from us you will have to demonstrate that you have or are obtaining an insurance policy. You are unable to practise until you have the PII in place and this should remain in place throughout all the time that you practise.
If you are running an unregulated business, you should consider the benefit of having PII in place.
How do I get PII?
- Select a broker to help you secure insurance and advise them who our qualifying insurers are.
- Decide whether the minimum level of cover of £2 million is sufficient.
- Complete the Professional Indemnity Application Form once, which can then be used with all our qualifying insurers.
- Once you have agreed a quote, do not put the cover on risk until you have received provisional authorisation.
- Once you have received provisional authorisation, put your PII on risk and arrange for a copy of the insurance certificate to be sent to us.
The links to the left will help you obtain your PII.
Buyers’ guide to Professional Indemnity Insurance
We recommend that you instruct a broker to help you secure insurance. Our Buyers’ Guide to Professional Indemnity on the left-hand side of this page provides you with further information on instructing a broker. Under our Rules, PII cover must be obtained from a qualifying insurer.
Additional Information
What is a qualifying insurer?
A qualifying insurer is an insurer that:
- Is authorised and regulated to conduct insurance business in the UK by the Financial Conduct Authority (FCA)
- Has a credit rating from AM Best of at least B+ or, Standards & Poor’s rating of at least Category BBB (CILEx Regulation does not undertake any additional steps to regulate, vet or approve qualifying insurers)
- Has signed the CILEx Qualifying Insurers Agreement
We provide a list of qualifying insurers which can be found on the left-hand side of this page
CILEx QIA and CILEx Minimum Wording
The minimum level of cover is £2 million and applies regardless of the actual wording of the policies. The minimum level of cover is contained within the Qualifying Insurers Agreement (QIA).
Each of our insurers sign up to the QIA, which requires qualifying insurers to offer a level of cover which should meet the CILEx Minimum Wording (found on the left-hand side of this page)
What if £2 million is not enough?
The minimum level of cover you are required to take is for £2 million however the total amount of PII you need will depend on the size of your entity and exposure to risk. You should seek advice from your broker and/or insurer to ensure that you have a sufficient level of cover for your entity.
If you decide to obtain cover above the compulsory level of £2 million, known as ‘excess layer or top up cover’, this cover will not be subject to the Rules. This means that you can obtain it from any insurer, not just a participating insurer, and on different terms and conditions to the CILEx Minimum Wording. It is not necessary to buy all of your cover from one insurer.
You must not exclude or attempt to exclude liability below the minimum level of cover of £2 million. If you seek to limit your liability to a level above the minimum level of cover, the limitation should be set out in writing and you should bring it to your client’s attention.
How do I inform consumers about my PII?
There are two specific rules that require our Authorised Entities to inform consumers that they have Professional Indemnity Insurance. These are:
- Provision of Services Regulations 2009
- CILEx Regulation Transparency Rules
Provision of Services Regulations 2009
The Regulations require that you provide clients with information about the insurance you have in place including the contact details for the insurer and the territorial coverage of the insurance.
You have a choice of four methods by which to make this information available to your client:
- You provide your clients with such information on your own initiative
- You make it easily available to your clients at the place where you provide the service by displaying your certificate, or where the contract for the service is concluded
- You make it easily available to your client electronically (for example, on your website)
- Make it available in any information document you supply to your client in which you give a detailed description of the service
CILEx Regulation Transparency Rules
The CILEx Regulation Transparency Rules (Transparency Rules) came into force on 14 January 2019.
They state that you are required to have Professional Indemnity Insurance (PII) to cover all legal services you provide, and it must be clear which legal services are covered by your PII.
As consumers assume all legal service providers are regulated, although they are not, you can emphasise your regulated status by emphasising the benefits of professional standards and consumer protections offered by PII and possible access to the CILEx Compensation Arrangements.
Consumers can feel reassured by the professional standards and consumer protection benefits that come with the use of a regulated firm.
Full details can be found at the Price and Service Transparency section of our website.
