If you already have Professional Indemnity Insurance (PI), you might simply renew your policy each year without much thought. However, there are important aspects of PI cover that are easy to overlook—details that may make a significant difference in your protection.

Typically PI insurance is a claims made basis policy, and this is important to understand as there are requirements under PI Insurance, relating to notifying of claims and also circumstance that may result in a claim.

So what does this mean?

With most insurance, you contact your Broker when you’re ready to make a claim. PI insurance, however, requires you to notify your broker as soon as you become aware of a potential issue—even if no formal claim has been made yet.

For example, if a client expresses dissatisfaction, threatens legal action, or advised you they are going to make a complaint, you should contact your broker as soon as possible, however, you must ensure that you submit the notification before your PI policy renews or ceases. Failing to report a potential issue or an actual claim (that you knew about) before your PI policy expiry date could impact if your Insurance company will indemnify you when you do submit a claim, meaning your policy may not respond and your claim could be denied.

The reason for the notification of claims or potential claims is because of the claims-made basis of PI insurance. PI policy can respond to claims that are made against you and notified to the insurer while the policy is in force (during your current policy period), regardless of when the incident that gave rise to the claim took place. However, this is subject to the retroactive date on your policy.

The retroactive date can have a big impact on the policy coverage under your PI, and may be considered as a key feature of PI insurance, as it defines if your policy will insure you for services / advice / treatment you provided prior to your current policy period.

Ideally, your policy should have an unlimited retroactive date, however, as a minimum it should be the date you commenced in the industry.

Retroactive cover may not be the case for all PI policies, for instance some policies set the retroactive date as the same day your policy commences, which could leave you with gaps in cover if a claim does arise from services you provided in a previous policy period.

Although a PI policy with a unlimited retroactive date is intended to insure you for services provided prior to your current policy period, claims made PI policies have an exclusion for claims and incidents that you were aware of before you arranged your policy, to explain further, it’s a bit like trying to arrange a motor policy after you had already had a car accident. To avoid any issue in relation to this, ensure you notify of any claims or incidents that may result in a claim before your current policy expires or renews.

Unlike other types of insurance, such as car insurance that you cancel when you sell your vehicle, PI insurance works differently. If you retire or stop practising, it’s crucial to consider maintaining your PI cover. This ongoing protection is known as ‘run-off’ cover. Run-off cover matters because the services you provide can have long-term effects, and claims may arise years after your work is completed.

Typically the run-off policy will have a specified period that its valid for and the period of cover for the run-off policy can vary based on what the insurance company agree to offer and of course what the insured is seeking. In some cases run-off cover is complimentary, however, this is not always the case, meaning you would need to check with your Broker if there is a cost associated with run-off cover for your business. Remember to contact your broker with at least 3 weeks notice so your Broker has time to seek the run-off cover and put everything in place.

Professional Indemnity Insurance can be more complex than it might first appear. Taking time to understand your policy’s features—and ensuring you have appropriate policy for your business can make all the difference. Consulting with a Broker who understands the specific risks in your industry can help you make sure your PI insurance truly meets your needs.