Professional indemnity in the first 12 months of trading.
The first 12 months of a new professional services firm are a busy time. PI is one of several insurance and compliance items that compete for attention with winning the first clients, building the back office, and getting paid. It is also one of the easier items to get wrong in a way that does not become apparent for years.
This starter kit is a short, practical guide for founders setting up cover for the first time, or moving from being insured under a previous employer’s policy to running their own.
It is not a quotation. It does not address every sector in detail. It is intended to give a founder enough vocabulary to have a sensible first conversation with a broker.
For most regulated professional services firms in the UK, the answer is “before the firm accepts its first instruction, not after”. Several professional bodies require evidence of PI cover as a precondition of authorisation or registration:
The Solicitors Regulation Authority requires SRA-regulated firms to hold qualifying PI in accordance with the SRA Minimum Terms and Conditions from the date of authorisation.
The Architects Registration Board requires registered architects in independent practice to hold adequate and appropriate PI cover; the ARB publishes guidance on what is considered adequate.
The Royal Institution of Chartered Surveyors requires regulated firms to hold PI in accordance with the RICS minimum terms, on a sliding scale linked to fee income.
The ICAEW, ACCA and other accountancy bodies require PI cover for members in practice, with limits commonly calculated by reference to gross fee income.
For firms outside these regulated regimes — IT consultancies, management consultancies, marketing agencies, recruitment firms outside REC — the timing is driven by client requirements. Many clients now ask for evidence of PI cover before contract signature. Where the firm signs a master services agreement or commercial contract that warrants PI cover from day one, the firm needs cover in place from day one.
A small but important practical point: cover often needs to be arranged before the first invoice is issued and sometimes before the first piece of work is done. Where work is being done in the run-up to authorisation, talk to a broker early.
A new firm without claims history cannot be priced or sized by reference to its own loss record. Limits and premiums are sized by reference to:
The regulatory minimum for the firm’s professional body, where one applies.
The contractual minimum requested by the firm’s largest or most demanding client.
The character of the work: a one-off advisory engagement on a small transaction is different from ongoing advice on a multi-million-pound matter.
The sums at stake in a typical engagement. PI claims are usually measured by the loss the claimant says they have suffered, not by the fee the firm earned. A modest fee on a high-value matter can still attract a very large claim.
Many new firms start at the regulatory minimum and review at the first renewal. That is usually a reasonable starting point. It is not a final answer. A firm that wins a single large client in the first three months should re-evaluate the limit at the point of winning, not at renewal.
This is the issue most new firms miss.
PI is almost always written on a “claims made” basis. The policy responds to claims first made against the insured during the policy period. It does not respond to claims about work done while the insured was covered by someone else’s policy, unless that prior work is brought within the new policy by a “prior acts” or “retroactive” date.
For a founder leaving an employer to set up a new firm, the work done under the employer’s roof is covered by the employer’s policy at the time the work was done. If a claim arises three years later about that work, the relevant policy is the employer’s policy in force at the time of the claim, not the employer’s policy in force when the work was done. Most employer policies will respond if a notification is made; some may not.
For a partner leaving a partnership, the partnership’s policy typically responds to claims arising from the partner’s work for the partnership, provided the partnership maintains run-off cover after dissolution or after the partner’s departure. The partner should obtain written confirmation of the position.
For the founder of a new firm, the practical implications are:
If the firm intends to advise former clients or to carry over engagements, the new firm’s policy will need a retroactive date that covers the founder’s prior work.
If the firm intends only to act on new engagements, the retroactive date can be the firm’s authorisation or incorporation date.
If the firm acquires a book of business from another firm — for example, a small practice acquiring the book of a retiring sole practitioner — prior-acts cover for that book needs to be arranged or explicitly declined with the partners’ knowledge.
This is one of the items most worth getting written advice on. A retroactive date set wrongly at year one is hard to revisit later.
A new firm should expect to be asked the following at first placement:
The full legal name of the entity and the date of incorporation.
The names, qualifications, dates of qualification and prior employers of every principal.
The professional body that regulates the firm, the firm’s reference number with that body, and the date of authorisation.
An estimate of fee income for the first 12 months, broken down by service line and by client type if possible.
The largest single engagement the firm has accepted or expects to accept, by fee and by value of the matter.
The split of work between UK and overseas; the split between corporate and consumer clients; the split between regulated and unregulated activities.
Any claims, circumstances, complaints, regulatory matters or disciplinary findings against any principal in their previous practice.
Any contracts already signed or in negotiation that contain PI obligations.
The firm’s risk management arrangements: engagement letter template, client take-on process, supervision and review, file management, IT and data protection.
Most of these questions are answerable in writing in less than an hour by a prepared founder. They are difficult to answer well in real time on a video call. Prepare in advance.
Where a founder does not know an answer, “we are still finalising this” is a better answer than a guess. Insurers are used to placing new firms and expect some answers to be provisional.
PI premium is usually payable annually in advance. For a firm in its first year, with limited working capital and uneven cash flow, that can be a meaningful number to pay in one go.
The main alternatives are:
Pay annually in advance from the firm’s working capital.
Pay through the insurer’s own instalment scheme, where offered. Some insurers will spread the premium across several months without involving a third-party finance provider.
Use a third-party premium finance facility. This is essentially a regulated credit agreement: the finance provider pays the insurer in full and the firm repays in monthly instalments, with interest.
Each option has consequences:
Annual payment preserves the cleanest cover position but uses the firm’s cash.
Instalment payment through the insurer can be simpler than third-party finance and is sometimes interest-free, but availability varies.
Third-party premium finance is a regulated credit product. The firm becomes a borrower under the credit agreement. If the firm misses an instalment, the finance provider can cancel the policy on the insurer’s behalf, with consequences for cover. The firm should read the credit agreement before signing and should treat the monthly instalment as a fixed business cost, not a flexible one.
A founder choosing between these options should look not just at the interest rate but at the cancellation provisions, the rebate position if the firm cancels mid-term, and the overall cost across the full year.
A new firm signing its first PI policy is unlikely to read the wording in full. That is understandable. The minimum a founder should do is to read:
The schedule, which contains the limit, the excess, the retroactive date, the named insured, and the territorial and jurisdiction limits.
The definitions of “insured”, “professional services”, “claim” and “circumstance”.
The list of exclusions, including any specific exclusions added by endorsement.
The notification clause, which sets out how and when a claim or circumstance must be notified.
These five reads cover most of the gaps that hurt new firms.
PI is one line of business. Most new professional services firms also need:
Public liability, particularly if clients or third parties visit the firm’s premises.
Employers’ liability, which is compulsory from the moment the firm employs anyone (including some categories of family member and apprentice).
Cyber, which is a separate response to data and ransomware incidents. PI is not a substitute for cyber and vice versa.
Office or commercial contents, where the firm holds property of value.
Directors’ and officers’ liability, for the personal exposure of directors and officers.
A first-year firm does not necessarily need every one of these on day one. It does need to make a conscious decision about each.
Legal (SRA-regulated): firms must arrange qualifying cover from the SRA’s qualifying insurers, on the SRA Minimum Terms. Run-off cover for cessation is a key part of the regime to understand.
Surveying (RICS-regulated): the RICS PI requirements operate on a sliding scale linked to fee income. The RICS publishes the table; check the current version each year.
Accountancy (ICAEW, ACCA, AAT): minimum cover is typically calculated as a multiple of gross fee income, with floor and ceiling figures. Check the body’s current rules.
Architecture (ARB / RIBA): the ARB Code requires adequate and appropriate PI cover. ARB and RIBA publish separate guidance on what is considered adequate.
Engineering (CIBSE, IStructE, ICE): PI is not always mandated by the body, but is almost always required by clients. Check both contractually and at the relevant body.
Recruitment (REC members): the REC Code requires PI cover; minimum levels are commonly set by reference to fee income and to client contract terms.
Management consultancy and IT consultancy: typically unregulated; cover is driven by client contract requirements. Pay particular attention to the cyber and IP exposures alongside PI.
Build a one-page “cover position” document for the firm and update it each year. It should list every policy, the insurer, the limit, the excess, the renewal date, the named insured, and the broker contact. Keep it where the principals can find it on a Friday afternoon. It costs nothing and it is the first document the firm will reach for in any difficult situation.
Apex Insurance Brokers Ltd. Registered office: c/o Westcan, 5 Anglo Office Park, Bristol BS15 1NT. Trading address: QCS, 53 Queen Charlotte Street, Bristol BS1 4HQ. Registered in England and Wales, Companies House number 07014570. Authorised and regulated by the Financial Conduct Authority, firm reference number 724952. Verify our registration at register.fca.org.uk.
Speak to Apex about your cover — 0117 325 0027 or info@apexinsurancebrokers.co.uk
Last reviewed: May 2026
Apex Insurance Brokers serves UK professional services firms and commercial businesses. Call 0117 325 0027, email hello@apexinsurancebrokers.co.uk, or request a quotation.
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