The Institute of Chartered Accountants in England and Wales (ICAEW) has amended its proposed changes to professional indemnity insurance (PII) arrangements for accountants after receiving consultation responses from the likes of the International Underwriting Association (IUA).
The responses to the ICAEW regulatory board’s consultation were a mixed bag, with some proposals eliciting a generally positive response while others drew strong opposition from the insurance industry.
For instance, according to ICAEW, more than 75% of those who responded agreed that the insurance requirements should be linked to fee income and not to the number of principals.
A little over half of the respondents, meanwhile, disagreed that making run-off cover automatic and non-cancellable for non-payment of premium should be introduced even if the premium increased. Additionally, 53% believe the changes would have a detrimental impact on a firm’s ability to obtain insurance.
“We supported plans to increase minimum limits of cover to £2 million and give smaller firms more flexibility in the minimum limits of cover that they can purchase,” the IUA said in a release. “The IUA also backed proposals to link cover to the fee income of a firm rather than the number of partners it has.
“However, our consultation response strongly disagreed with suggestions that ICAEW firms should have non-cancellable run-off cover of six years. This would mean insurers could still be forced to cover risks regardless of whether or not a company paid their policy premium.”
Proposals for insurers to pay claims without guarantees that they will receive any policy excess payments due were also criticised.
Acknowledging the IUA’s detailed response to the consultation, ICAEW said: “The IUA was supportive of proposals to increase limits of indemnity and linking the calculation to fee income rather than the number of principals. However, the IUA also expressed several concerns.”
In the IUA’s view, the original proposals had the potential to have significant implications for PII availability and affordability.
Responding to the feedback, ICAEW declared: “We have considered the responses to the consultation in detail and reflected on the feedback received. As a result, not all proposals are being taken forward and some have been modified in light of the consultation responses. Updated PII Regulations will come into effect on September 1, 2023.”
Commenting on the development, IUA director of legal, underwriting, and claims Chris Jones said: “We were pleased to participate in this review and strongly support its broad aims of providing clarity on what compliant insurance for accountants look like and to ensure appropriate liability protections are retained.
“The revised proposals will benefit firms and consumers. They are thoughtfully constructed to prevent both a reduction in the number of insurers providing cover and ensure that insurance premiums continue to be a reasonable cost for accountants.”
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