Aipedia: Insolvency practitioners

AI in pre-appointment advice

Aipedia, by the Apex broking team · Last reviewed 2026-10-27

AI can draft pre-appointment options advice for directors and debtors, but the IP remains responsible for recommending the right procedure. A claim that the wrong route was chosen usually falls to PI, not the bond.

Part of: AI in Insolvency practitioners

In short

Digital pre-appointment platforms and AI-drafted options letters speed up advice to directors and debtors. The risks are incomplete information, a tool that defaults to a particular procedure, and conflicts that the platform does not identify. The Insolvency Code of Ethics requires the IP to decide whether AI output is appropriate (R321.1), to guard against automation bias and to record conflicts considerations (R312.9, R140.2). Claims that the wrong procedure was recommended usually fall to PI, subject to the wording, rather than to the statutory bond.

How AI is used before appointment

Before any appointment, directors and individuals need advice on their options: administration, liquidation, a CVA, an IVA, bankruptcy or an informal arrangement. Digital pre-appointment platforms may collect financial information online, and AI tools can draft options letters and comparisons. R3's 2026 report lists pre-appointment onboarding among current uses.

The advice given at this stage shapes what follows, and the person receiving it is usually under severe pressure. A director facing creditor pressure, or an individual with mounting arrears, may accept whatever recommendation is put in front of them, so the quality of the analysis behind it matters more, not less. Digital platforms also change the relationship: the first substantive contact may be with a form, not a person, which makes it easier for important context to go unsaid.

The duties that apply

Pre-appointment work is professional advice and the Insolvency Code of Ethics applies in full:

R321.1: the IP must determine whether an AI-drafted options analysis is appropriate for the intended purpose.
115.1 A6: insufficient data. Pre-appointment information is often incomplete or optimistic.
117.3 A2: automation bias, including accepting a tool's default recommendation.
R312.9 and R140.2: record how conflicts and ethical issues were considered, particularly where the adviser may later take the appointment.
300.2 and R300.5: appropriate expertise for the appointment being considered.
R104.3 and R104.4: confidentiality of the information provided.

Objectivity matters here. A tool configured, deliberately or not, to favour procedures the firm offers can undermine it.

What can go wrong

Illustrative scenario: a director completes an online questionnaire, and an AI tool drafts an options letter recommending a creditors' voluntary liquidation. The tool did not weigh a recent large contract win mentioned in an attachment, which might have supported a rescue procedure. The IP signs the letter with light edits. After liquidation, the director argues the business could have been saved and that the advice caused the loss of the company and the calling of personal guarantees.

Other risks:

debtors advised towards an IVA or bankruptcy without proper consideration of alternatives; see IVA onboarding;
conflicts not identified because the platform did not ask the right questions;
figures in the options analysis that later feed an over-optimistic estimated outcome statement.

How PI usually responds

A claim that the wrong procedure was recommended is a negligence claim arising from professional advice. PI usually responds subject to the wording, but check that advisory work before appointment is within the policy's description of professional business, and how the policy treats advice given through digital platforms. R3 found some practitioners unsure whether PI covers AI errors. The statutory bond relates to the performance of functions in an appointment, so it is unlikely to respond to advice given before one; see bond vs PI.

For a wider view, see AI-generated advice and professional negligence.

Practical controls

Have the IP speak to the director or debtor before options advice is finalised.
Check that the tool considered all realistic procedures and record why others were rejected.
Run a conflict check outside the platform and record it.
Confirm key facts against documents, not just questionnaire answers.
Keep the AI draft and the final letter, so changes are visible.

How Apex helps

Apex arranges PI for insolvency practitioners, and a broker can check your policy covers pre-appointment advisory work. See PI for IPs, the Code of Ethics explainer and the insolvency practitioners hub.

Sources

Frequently asked

Can AI draft options advice for directors?

It can produce a draft, but the IP must decide whether it is appropriate for the purpose under R321.1. Options advice depends on facts that questionnaires often miss, so a conversation with the director and a check of key documents are important before advice is given.

Does the insolvency bond cover pre-appointment advice?

Unlikely. The bond secures the proper performance of an IP's functions in an appointment. Claims about advice given before appointment would usually be a PI matter, subject to the policy's description of professional business.

Is a digital platform a conflict risk?

It can be. A platform that only presents procedures the firm offers, or that does not ask about prior relationships with the company, its directors or creditors, may let a conflict go unnoticed. Running and recording a separate conflict check addresses this, consistent with R312.9 and R140.2.

What records should I keep for pre-appointment work?

Keep the information received, the options considered, the reasons for the recommendation, the conflict check and any AI draft alongside the final advice. The Code expects records that let a reasonable and informed third party assess what was done.

Check your PI covers how you use AI

Tell us about your firm and the work you do. A broker will review how your current PI treats AI-assisted work, or arrange new cover. No fee for a quote. Or call 0117 325 0027.

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Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information about how AI is used in the profession and how insurance may respond. It is not legal, regulatory or insurance advice on your circumstances, and it does not guarantee that cover will be available or on what terms.