There is no such thing as a 'good' professional indemnity claim; having to deal with a claim or even the potential for a PI claim can be a time-consuming and stressful experience.
However, there are some clear pointers that can help you to make the process as smooth as possible.
Of course, as with all trauma, humans naturally rely on the belief that it will never happen to them, but understanding how the process works and being prepared for it before it happens will pay dividends.
If the worst does happen, there are some key things to remember – all of equal importance:
1. Don’t delay – notify
As soon as you become aware of a potential or likely circumstance that could result in an allegation or claim being made against you, you must notify the circumstances to your PI insurer immediately.
This early notification is a requirement of the wording of all PI policies. Not all complaints lead to PI claims but all issues that might even potentially result in a financial loss to a client, and therefore have the potential to lead to a claim, should also be reported to the insurer as a ‘precautionary claim notification’.
For example, imagine the following scenario: An adviser fails to send a renewal invite for a client’s general insurance policy, or the renewal invite was late. The policy automatically renews.
On the face of it there is no complaint made as yet; however, there is very real potential for a financial loss by the client (and therefore a claim on the adviser’s PI policy) if the client later has a claim rejected on that policy and blames the adviser for not having had adequate time to check the policy before it automatically renewed.
As a general rule, if you are in doubt whether a scenario could lead to a claim, always notify.
Multiple precautionary notifications won’t necessarily have an impact on your premium. Being able to illustrate to your insurer that you are able to identify gaps in your processes and correctly rectify them before they become an issue shows a robust risk-management practice.
2. Never admit liability
Never admit liability or discuss the terms of your PI policy with a client.
Not only can this encourage the likelihood of a claim, but it can also have other unintended consequences, such as to prejudice the claim, impacting the way the insurer handles the claim and putting it at greater risk of financial loss.
3. What to record and share with your insurer
If you are formally notifying a claim then the more information you can provide the insurer with the better.
In particular they will be looking for:
- Copies of any documents and correspondence relating to the issue/claim. As a well-managed business, you should have a clear letter of engagement, recorded file notes of all client meetings, and a record of any advice offered to the client.
- The date you first became aware of the issue/claim.
- Names and details of the claimant and other parties involved.
- Your summary account of the issues and your views on liability and/or where blame lies.
- Your estimate of any potential financial loss experienced by the client.
4. Do not try to ‘fix’ the issue
Never try to ‘fix’ the issue yourself through mediation or any other means.
A PI claim can often be emotionally charged. Clients are likely to be making complaints during a stressful period; they are saying that an adviser has made a mistake and advisers often take it personally.
