Proposed changes for professional indemnity insurance (PII) run-off in the UK

3 Identified problem

3.1 As part of the call for information, we asked insurers for details on the length of time between claims being made and when the work was carried out. The data received showed that claims were brought consistently over the first six years following the closure of a firm, reflecting the most commonly applicable statutory claims limitations.2

3.2 In light of this, RICS considered whether or not the requirement to maintain PII for an 'adequate and appropriate' amount of time after closure offers consumers enough protection.

3.3 The current RICS approach is to advise firms to consult with their broker to determine what an 'adequate and appropriate' timeframe is, consistent with the wider professional indemnity market. Our discussion with brokers indicated that a prudent broker would advise a period of at least six years. Longer may be necessary in some cases, depending on the type of work a firm has undertaken and the point at which the complainant was made aware of the problem.

3.4 However, as the onus is on the firm, there is no certainty that such advice will be obtained or that run-off will be maintained for that period. While RICS firms are required to provide evidence of a run-off policy upon closure, we are limited in our ability to monitor firms after that time.

3.5 This suggests that six years3 would be an appropriate period to clarify adequate and appropriate cover, and a mechanism would be required to ensure that cover was taken over the full six-year period.