How much does professional indemnity cost?

Occupation 

Your occupation is a key rating factor. In simple terms, the greater the perceived risk of your occupation, the higher the premium will be.  This ‘risk’ that we refer to, is based on an insurer’s claims experience for your industry and your overall risk profile. Furthermore, the insurer will consider any legislative requirements that may attach to your occupation and contractual requirements. For example, a building surveyor dealing with Building Codes and Australian Standards will attract a higher premium than an interior designer due to higher exposure to claims of negligence and legal action.

Some occupations, such as Accounting or Information Technology Services (IT), will be rated differently depending upon what work they do. For instance, an IT company providing software development will be rated different to a company that isn’t. Here’s another example. An accounting company that is providing auditing services to a public listed company will be rated higher than business that aren’t.

Professionals delivering specialised professional service offerings, including Management consultants, IT consultants, and health professionals, are often assessed differently depending on their exposure to civil liability risks and claims made history.

Professional Fees

Professional fees or income, will also be a factor in determining your professional indemnity insurance premium. In general terms, the greater the professional fees or income, the higher the exposure for the pi insurer. To illustrate, the cost of a PI policy for a business who has annual professional fees of $5,000,000 will be much more than a consultant who is turning over $100,000.

Insurers may also consider business turnover when assessing insurance cost exposure, particularly for businesses providing ongoing professional advice to multiple clients.

Size of Business

Similar to professional fees, the size of a business (including the number of staff employed) will influence your professional indemnity premium. For instance, the premium will higher for a national company with multiple employees compared to an independent consultant or contractor. In simple terms, the more work (and the more client’s) the greater the exposure for the insurer.

Businesses with larger teams may also face increased defence costs and legal costs if multiple parties are involved in a dispute or allegation relating to professional services.

Policy Limit

The higher the professional indemnity policy limit, the greater the potential amount the insurer will pay. Hence why the pi insurer charges more money for the higher limit. Higher limits may also provide additional protection for legal defence costs, legal fees, and defence costs associated with complex claims made against your business.

Claims Experience

Insurers require disclosure of all past claims made against your business. A history of frequent claims can significantly impact your premium rates and future insurance policy terms. Reviewing professional indemnity claims examples can provide insights into common issues faced by professionals in your field, including breach of duty, negligent liability, and other claims of negligence, helping you better understand potential risks and coverage needs.

Your claims history is one of the most important underwriting factors, particularly where there have been repeated allegations, Fraudulent claims, or disputes involving Errors and Omissions.

Minimum Premiums

All insurance companies will set a minimum premium for their product, regardless of the factors listed above. This is mainly due to their cost of doing business. As a result, you may find that your insurance premium will change if your turnover is $50,000 vs $100,000.