How to measure your Professional Indemnity risk

How to measure your Professional Indemnity risk

How is the size of the Professional Indemnity risk measured?

There is no perfect system for measuring the size of the risk, but once the rate for a particular occupation is established, along with other factors such as claims history and location then the next consideration is turnover. But the turnover considered for PI purposes are gross fees earnt. Professional Indemnity insurance pricing is mainly focused on fee revenue, since the risks to professionals typically arise out of the service that they are delivering (as opposed to the sale of products or the existence of property).

The theory being that one company earning $1,000,000 in fees would have twice the exposure of a company earning only $500,000. The theory also is that the latter would have half the number of staff to generate that income hence half the risk. At the moment with the gross fees, we have the most reasonable feel for the size of an exposure.