New businesses

What drives the price of insurance for a new business

In short: Nobody can quote a professional indemnity premium from a job title, and any website that puts a figure on it is guessing. What an underwriter actually prices is the size of the exposure, the severity of what could go wrong, and the evidence that it probably will not — your income, your activities, your limit, your excess, your claims record and your experience. This page explains each lever so you can see which ones you control.

Fee income

The single biggest rating factor on professional indemnity. It is a proxy for how much work you do and therefore how much can go wrong. For a new business it is your estimate for the first twelve months, which is why a considered estimate is worth more than a round number plucked out of the air.

What you actually do

Two firms with identical income can be priced very differently. Design work carries more exposure than pure advice; work that ends up in the ground or in a structure carries more than work that ends up in a report; anything touching higher-risk buildings, contaminated land, asbestos, tax planning or investment advice attracts specific attention. The activity split is not box-ticking — it is most of the price.

Limit of indemnity

Higher limits cost more, but not proportionately. Doubling a limit rarely doubles the premium, because most claims never reach the upper layers. Which means buying the limit your contracts and your realistic worst case require is usually better value than buying the smallest limit you can defend.

Excess

The amount you pay on each claim before the policy responds. Taking a higher excess reduces the premium; it also means you carry the first slice of every claim, including the defence costs on small ones. For a new business with limited cash, a large excess can be a false economy.

Claims and circumstances

A clean record helps. A disclosed claim is a rating factor, not automatically a decline, and underwriters are more interested in what changed afterwards than in the bare fact of it. An undisclosed claim discovered later is a different matter entirely, and can cost you the cover when you need it.

Experience and qualifications

This is where a new business often does better than it expects. Chartered status, years in the discipline, a recognisable previous employer and a clean personal record all count, and for a start-up they carry more weight than usual because there is nothing else to look at.

Contract terms and how you work

Standard written contracts, defined scopes of work, sign-off procedures, checking regimes and a habit of putting things in writing all reduce the chance of a claim and the cost of defending one. Underwriters ask about them because they are predictive. A new business that can describe how it will work is in a better position than one that cannot.

Why we do not publish a price

Because it would be meaningless. The range across two firms with the same job title and the same income can be wide enough that any published figure would mislead at least one of them, and a figure that turns out to be wrong at the point of buying is worse than no figure at all. What we can do is tell you which of the levers above are moving your price, and what a different limit or excess would do to it.

Frequently asked questions

Is insurance more expensive for a new business?

Not inherently. Low first-year income tends to pull the premium down; absence of a track record can pull the other way. Experience and qualifications are what tip the balance, which is why the proposal form asks about them.

Will the premium fall as the business establishes itself?

The rate might, as a claims record builds. The premium itself usually rises with income, because you are doing more work. The two move independently.

Should I take a higher excess to reduce the premium?

Only if you could comfortably fund it on every claim in a bad year, not just once. Defence costs on a modest claim can exceed a modest excess on their own.

Does buying a higher limit cost proportionately more?

Usually not. The upper layers are less likely to be reached, so they are cheaper per pound of cover.

Can I pay monthly?

Premium finance is commonly available and adds a credit cost. Ask for the annual and monthly figures side by side so you can see it.

Starting out, and no trading history to show?

Our new-business proposal forms ask what you expect to earn and where you did this work before, instead of turnover figures you do not have yet. Bristol-based, FCA-regulated, wordings first.

Call 0117 325 0027 info@apexinsurancebrokers.co.uk

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.

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