What is Professional Indemnity Insurance?

Professional Indemnity Insurance or commonly known as Error and Ommission Insurance guarantees the legal responsibility of the insured for compensation to third parties who suffer bodily injuries or financial losses as a result of negligence committed by the insured and his employees in relation to the insured’s profession.

What is Professional Indemnity Insurance?

In a general context, the legal responsibility of a profession must be based on a breach of contract. This arises when a person is employed as a profession and there is a legally recognized contract between him and the clients. Even though in the past professional indemnity insurance was considered quite high risk, in its current development it has developed quite impressively. One of the reasons is PP No. 63 of 1999 which requires every insurance broker and reinsurance broker to have professional indemnity insurance with a minimum limit of IDR 1,000,000,000.-.

Until now, there is no standard professional indemnity insurance policy in Indonesia. Policies vary from one insurance company to another and differ from one profession to another. Even so, it is highly recommended that for any profession, it is accompanied by a clause on the existence of a proposal form that must be filled in and signed by the insured and make the proposal form an integral part of the insurance policy. So if in the future discrepancies are found or there are other things that are not informed in the proposal form (non-disclosure), the policy will become invalid.

Professional Indemnity Insurance Policy

Operative clauses or insuring clauses listed in the policy generally state:

“To indemnify the insured against any claim for damages for breach of professional duty which may be made against him during the period of insurance due to any neligent act, error or omission whenever or wherever the same was or was alleged to have been committed by the insured or his predecessors in business or any employee of the insured.”

As with other liability insurance, compensation is based on the amount of claims or compensation with a maximum limit of the limit of liability. Claims that occur must arise as a result of a breach of professional duty. It should be emphasized that a person with a certain profession can have potential liability to a third party on the basis of negligence in a broad sense, but not all negligence (performed by the insured) can be guaranteed or not all of them fall within the scope of breach of professional duty. For example, a surgeon’s negligence in driving his vehicle by hitting a third party should not be covered by professional indemnity insurance.

In a professional indemnity insurance policy generally excludes libel and slander. Also claims arising as a result of employee dishonesty and/or crime. Although in its current development libel, slander and dishonesty from employees are often used as an extension of the policy, subject to additional premium.

Why do Professionals need “Professional Indemnity Insurance (PI) ?

  • Today’s professionals face enormous responsibility and accountability, they may be faced with very serious legal proceedings in connection with their duties and obligations.
  • Any person or consultant who provides advice or services or business services is very vulnerable to claims of ‘professional indemnity’ which can result in enormous financial losses.
  • Public legal awareness is increasing, so that aggrieved parties tend to use their rights to sue in court.
  • Professionals must also maintain their reputation, integrity and assets from lawsuits by parties who feel aggrieved.
  • The legal process can be very serious, expensive and tedious, Professionals must ensure competent and qualified lawyers to defend their interests.
  • With “Professional Indemnity Insurance (PI)” Professionals will be more  confident  in facing business challenges because they have  financial back-ups  to deal with claims and legal proceedings.

Who needs this Professional Indemnity Insurance protection?

Contractors, Lawyers, Medical Professionals, Accountants, Stock brokers, Auctioneers, Tax agents, Finance brokers, Surveyors, Engineers, Architects, Real Estate agents, Solicitors, Mortgage brokers, Advertising agents, Child Care centres, Charitable organizations, School/Colleges, Entertainment , Travel Agents and others.

How to get a PI Insurance Quote?

The client must complete the proposal form in order to provide complete information such as the field of business or services provided, total revenue, claim history, etc. for underwriting considerations.

The terms and conditions of coverage are determined based on the information provided (including but not limited) to the following factors:

  • The field of business or professional services provided – whether they fall into the category of low, medium or high risk.
  • Total income – the greater the income usually indicates the higher the level of risk
  • Percentage of activity (based on total revenue) derived from overseas – USA, Canada and Europe are usually categorized as higher risk compared to Indonesia or Asia.
  • Client claims history – whether there have been any claims, types and extent of losses.
  • Requested limit of liability and deductible.
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