What Changes About PI as Your Firm Grows

A growing firm assumes its insurance grows with it — same policy, bigger numbers. PI does not work like that. The cover that fitted a two-person consultancy is not a smaller version of what a sixty-person firm needs; it is a different product, bought a different way, and the transition happens not gradually but at identifiable thresholds. Firms that recognise the thresholds cross them deliberately. Firms that don’t discover them at renewal, or worse, at claim time. Here is the map.

The people thresholds: first hires and the second office

The first employees change the risk in kind, not degree. A sole practitioner’s PI covers one person’s judgement; the moment there are employees, the policy is covering work the principal did not personally do and may not have personally checked. Supervision, file review and sign-off procedures become underwriting questions because they are now the only control between an employee’s error and a claim. Proposal forms start asking about them, and honest answers start affecting terms.

The second office repeats the effect at larger scale. Two locations mean work being produced that the founding principals no longer see daily, local hiring, and often a new service emphasis in the new location. Underwriters do not object to any of this — but they rate the firm on how deliberately it is managed. A firm that opens an office and mentions it to its broker afterwards has missed the chance to present the controls alongside the growth, and mid-term changes of this kind are usually notifiable in any case.

The contract thresholds: mandated limits, warranties and the first overseas client

The first contract that specifies a PI limit is the moment the firm stops choosing its own cover. Until then, the limit was a judgement; now it is a term of trade, and every subsequent large client will have a view. These mandated limits arrive without regard to what the firm currently buys — a £5m requirement lands on a firm carrying £1m — and the gap has to be closed before signature, not after, because warranting insurance you do not hold is a poor start to an engagement. Larger firms end up carrying the limit their most demanding contract requires, which is why the contract book, not the risk appetite, effectively sets the top of the programme.

The first collateral warranty extends duties to parties who are not clients at all — funders, purchasers, tenants — typically for many years, with an obligation to maintain insurance throughout. The first overseas client raises questions the domestic policy never had to answer: whether the policy’s jurisdiction and territorial clauses cover work for that client, whose courts a dispute lands in, and whether US or Canadian exposure — which most UK wordings treat very differently — is now in play. Each of these can be handled cleanly if raised before commitment; each is expensive to retrofit.

The product threshold: where online policies stop fitting

Somewhere in a firm’s growth — the boundary varies by profession, but it is real everywhere — the online, form-driven PI product stops fitting. The forms cap headcount and fee income; above the cap, the answer is simply that the product is not available. Before the cap, the deeper problem appears first: the firm’s work no longer matches the tick-box description of its trade. Mixed disciplines, novel services, design responsibility, sub-contracted specialists — the form has no box, so something approximate gets ticked, and an approximate answer on a proposal form is a defect in the firm’s fair presentation of its risk. The threshold to act on is not “when the website refuses to quote”; it is the earlier moment when describing the firm accurately requires a conversation rather than a dropdown. From that point, the firm needs an underwriter who reads a submission, which means a broker who writes one.

Why growth guarantees renewal surprises: fee-based rating

PI premium is rated substantially on fee income — the proposal form asks for last year’s fees and the coming year’s estimate, and the rate is applied to that base. A growing firm therefore experiences premium increases that have nothing to do with claims, market conditions or the insurer’s mood: the base grew, so the premium grew. Firms that do not understand this read a 30% premium rise after a 30% fee rise as a broker failure, and firms that do understand it plan for it — premium becomes a roughly proportional cost of sales rather than a fixed overhead. Two practical consequences: fee estimates given at renewal should be honest but not heroic, since a wild overestimate buys cover the firm did not need; and a firm growing quickly should ask how its policy treats the difference between estimated and actual fees, because policies handle the true-up differently.

The subtler renewal effect is mix. Rating differs by activity: the same million pounds of fees is priced differently if it came from a higher-risk discipline. A firm whose growth came from a new, riskier service line will see the rate move as well as the base — which is only a surprise if the new service line never made it onto the proposal form.

The schedule that falls behind the firm

Which is the thread joining every threshold: the description of the firm in the policy schedule and proposal form ages faster than anyone expects. Business descriptions written five years ago rarely cover what a grown firm now sells — the advisory work added around the core service, the design input that crept into a delivery role, the retainer that quietly became something close to an outsourced function. Cover follows the described business; work outside the description is work the insurer never priced and may argue it never covered. The discipline that prevents this costs one meeting a year: read the description, list what the firm actually sold in the last twelve months, and reconcile the two before renewal rather than after a claim. Growth is the good problem — but only if the paperwork is growing at the same speed as the firm.

Frequently asked questions

Our contract demands a higher limit than we carry — what are the options?

The usual routes are increasing the primary limit at or before renewal, adding an excess layer above the existing policy mid-term, or — where the demand is disproportionate to the engagement — negotiating the requirement itself, which clients accept more often than firms expect. What rarely works is signing first and resolving the insurance later: the warranty of cover starts at signature.

Do we need to tell our insurer about changes mid-term, or can it wait for renewal?

Material changes — a new service line, an acquisition, a second office, a significant overseas engagement — are generally notifiable when they happen, and most policies say so. Waiting for renewal leaves a window where the risk on the ground differs from the risk that was presented, which is precisely the gap coverage disputes are made of. A call to the broker at the point of change costs nothing.

When is a firm too big for an online PI policy?

Before the forms say so. The published caps on headcount and fees are the hard boundary, but the practical one arrives earlier — when the firm’s actual mix of work can no longer be described accurately by the options on the form. If describing what you do requires a paragraph and the form offers a dropdown, the product has stopped fitting, whatever the premium says.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). Every risk is different: nothing on this page is advice on your own programme, and outcomes depend on your firm’s circumstances and the market at the time.