Mastering PI insurance when you're self-licensed

Professional indemnity (PI) insurance is often one of the largest expenses for self-licensed practices, second only to staffing costs and rent (if you have it).

It usually accounts for between 1.5% to 2% of turnover. Therefore, ensuring that we keep the PI insurance premium to a minimum while maintaining robust coverage and low excess is crucial.

Over the years, our dedicated efforts have paid off – we've managed to keep our PI premiums stable or even lower year-on-year, despite an increase in turnover. This has been achieved by focusing on several key areas that can influence PI costs.

These are our top five:

• Compliance: adhering to stringent compliance standards and working with external compliance committees ensuring an excellent understanding of regulations.
  
  
• Claims history: maintaining a clean claims record.
  
  
• Processes and procedures: ensuring all processes and procedures are well-documented and followed rigorously.
  
  
• Investment committees: having structured investment committees.
  
  
• Board meetings: conducting regular and effective board meetings.

To further bolster our PI insurance standing, we've developed a comprehensive document for our PI broker. This document provides a detailed overview of our operations, reflecting our commitment to transparency and risk management.

Here's a glimpse of what we include:

• Business model: a thorough description of our business and service model.
  
  
• Client profile: details about our ideal clients and their demographics.
  
  
• Fees and payments: explanation of our fee structure and payment methods.
  
  
• Technology and consultants: information on our software stack and external IT consultant along with our cyber security controls.
  
  
• Financial audits: feedback from our AFSL financial auditor on our numbers and processes.
• Compliance feedback: written feedback from our compliance consultant.
  
  
• Adviser training and supervision: how we supervise and train our salaried advisors.
  
  
• Investment committee minutes: records of our recommendations and client breakdowns, including SMSFs, trusts, platforms, and LRBAs.

This six-page document is detailed and has received positive feedback from our broker. It instils confidence in the PI insurer, showcasing our low-risk profile and thorough understanding of our operations.

Another adviser once mentioned to me that providing ample information to your broker makes it easier for them to grasp your business intricacies and secure favorable terms. This advice has proven invaluable.

Setting up this document required an initial effort, obviously, but it has been worth it. By updating it annually and providing more detail than just the basic answers, we have ensured continuous improvement in our PI insurance terms.

Mastering PI insurance for a self-licensed practice is a journey of diligence and meticulous planning, but with the right strategies it's definitely achievable – and beneficial.