Professional indemnity insurance is, along with all types of insurance, something that people do not really want to buy nor do they really want to use it. But, if they do need to use it, they want it to operate fully to cover their claim.
This means, when we get a new quote request, and we ask the customer what limit of indemnity do they need, we get one of, or a combination of these three responses:-
1) What is the minimum limit you can sell me?
2) I need a limit of £x under either the terms of a contract or because their professional body requires cover to be in force.
3) What do you suggest?
We never answer question 1 without addressing question 3. The minimum we can usually quote is £100,000, but this will be inadequate for most businesses in 2011. We then discuss with the client about, in the worst possible scenario, what could they face as a single claim. Following this we will usually quote three or four different limits so that they can see the differences, in premium, are not that great when you go from £250k, to £500k, to £1m to £2m.
If they ask for a standard limit due to a contract or membership of a professional body, we will ask if this is still sufficient. Being part of a professional body, with them asking for a limit is usually at a sensible limit. This is because the professional body knows what type of claims to expect. As an example, as a business insurance broker we have to have in force £2,000,000 worth of cover, in respect of each and every claim.
The problems occur when they are entering into a contract which does not state a limit, this is where they may be tempted to take the lower limit. It is of course up to the customer to choose, we can only recommend. But, if they are choosing a limit which we feel is inadequate, we will tell them this and give them the option of a higher limit. The difficulty is that the customer can sometimes perceive this as Businessinsure flogging them a limit that they do not need, so we can earn more money. That, however, is the brokers dilemma though, We have to give good quality professional advice, but the customers want it on the cheap.