What is the difference between professional indemnity insurance and client money protection?

There is considerable confusion about the difference between professional indemnity insurance (PII) and client money protection (CMP). On a number of occasions, our agent clients (particularly those in Scotland), have been (wrongly) advised by their insurance brokers that their PII provides the same cover as CMP.

 

With CMP now being a mandatory requirement in Scotland, Wales and England, it is a good time to take a look at how it differs from the protection offered by PII, which is a requirement for CMP membership.

 

Agents need both types of cover to ensure that both their client’s money and their business are protected. But how does PII differ from CMP when it relates to monies held by the business?

 

For a full explanation, read our article, ‘Understanding the difference between professional indemnity insurance and client money protection’ at Client Money Protect, a CMP scheme operated by Hamilton Fraser.

 

The key distinction to note, however, is that PII policies are designed to recompense the business (policyholder) should it suffer financial loss due to its’ unintentional actions.  They are not designed to cover criminal acts carried out by the owners of the business. The presumption made by an insurer is that the business will still trade and service its clients.

 

CMP, on the other hand, protects the landlord or tenant (but not the letting agent) and reimburses them if the business fails due to the theft of client money by the owner or principal. In this scenario, the business owners deliberately cause the business to become insolvent or to cease trading, with no intention to repay the clients.

Premiums start from £9.33* a month

*Based on £100,000 worth of cover. Plus insurance premium tax (IPT) currently at 12%.