Recently we have put in a bid for a transcription tender with a UK university and part of the requirement was for the bidders to hold a £5 million professional indemnity insurance policy. Professional indemnity insurance (PII) is the insurance covering a business if a mistake is made and the client issues a claim for negligence.
Minimum requirement
PII is usually requested by most academic institutions even though most professional service contracts for this type of work exclude liability for a lot of things. Its essentially there to cover circumstances where something is so wrong with work and it causes loss. The client can issue a claim under this insurance and obtain compensation. Different sectors have differing levels of professional indemnity insurance requirements, but most are agreed on a minimum level of £2 or £5 million.
Not all transcription companies are the same
PII is an issue that means that not all transcription companies are the same.. Most smaller transcription companies will not hold professional indemnity insurance and if they do it will be for a very small amount of cover. PII is not cheap and can be eye-wateringly expensive depending on your track record as a business. The industry norm for transcription and translation is £5,000,000, although in reality £2,000,000 is probably sufficient to cover most work in terms of value and potential loss.
Tender experience
In relation to the recent bid we have put in for the university tender mentioned above – strange things happened. We went through the process at the start of January. If anyone is reading this who has not put together a tender before – they are quite painful, laborious and can quite literally take days to complete. We ensured that we complied completely with the university’s specifications – which included holding £5,000,000 of cover for professional indemnity insurance.
Goalpost moving
Once the tender deadline had been reached the university then put out a note to say that they were going to extend the deadline due to the effects of Covid, which was understandable enough, but then they further clarified this with a note to say that they were only going to require £1,000,000 worth of professional indemnity insurance cover rather than £5,000,000 worth. This was because they said this is the accepted level in the transcription industry.
Is £1 million the accepted PII limit in the transcription industry?
We really wish it was! However the vast majority of tenders we bid for and contracts we agree as preferred suppliers do not have £1,000,000 worth of professional indemnity cover as their limit – they usually require at least £2,000,000 and more often than not we have to hold £5,000,000 worth of cover.
Poking head over parapet
We did not dispute the assertion by the university that £1,000,000 is the recognised limit because there is a common idea that if you identify yourself as a troublemaker when pitching for tenders then chances are you’re not going to be successful. Also perhaps the fact that we hold £5,000,000 worth of professional indemnity insurance will make us stand out compared with those who only hold £1,000,000.
However we thought it worth a blog article simply to say that it is simply not true that the recognised limit for the transcription and translation industries is for £1,000,000 worth of professional indemnity insurance cover rather than £5,000,000.
£2,000,000 is probably more common but a good number of our clients require us to hold £5,000,000 worth of cover and this is why we spend considerably more on our professional indemnity insurance.
Reality
Putting this into perspective in terms of any claim – if you were to want to claim against a business for negligence in a situation where perhaps your claim is worth about £500,000, then you are almost certainly going to need at least £2,000,000 worth of professional indemnity insurance cover. This is because 75% of your claim will be in legal fees and the 25% you are going for will only be covered if you have insurance right up to that sort of level. There is after all no point in issuing a claim against a company that only turns over £75,000 a year if your claim is for a lot more.
Even if you are successful with your claim the company will simply fold and you will not get anything. This is the purpose of professional indemnity insurance cover – it protects you the client against any negligence on the part of the supplier, but if the supplier only holds a low level of insurance cover then it is highly unlikely you are going to get anything back in the event of a claim.
University withdraws tender completely
Just to add to the mystery around this tender – the university in question have now withdrawn their tender completely, with the intention of relaunching it later in the year… We really hope they do – after all the time you take completing tenders is gone forever and I spent a Sunday writing this one! Watch this space – it will be interesting to see whether or not the university require £1,000,000, £2,000,000 or £5,000,000 of PII cover..
