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Fee Protection Insurance

Any thoughts we are are a small practice looking at fee protection for the first time, we have received some literature from copperfields in North Wales

Any one used them thank you
Andrew Smith

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By loz
22nd Oct 2002 18:21

Our experience
We have used IRPC, now part of Croner CCH, for at least 10 years and have found them to have a practical approach in setting premiums based on client numbers - they don't want a full client list etc. Their claims handling has again been very practical and proactive - they even accepted a claim I made recently for a case settled 2 years ago which I had forgotten about (I think they reminded me!). Take up from clients has been consistent over the years. After fine-tuning our standard letters etc., we now make a profit every year just on recharged premiums at sensible rates, before you start to consider 100% recovery on the jobs themselves which historically would have suffered write-offs.

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15th Oct 2002 10:41

Do not put your daughter on the stage, Mrs Worthington?
Copperfields :- used to operate a retospective monthly fee billing arrangement to arrive at a premium, which I found unoperable for various reasons. They changed Underwriter recently and may be using a different system now.
Self Insurance :- forget it, too "risky",if your terms and conditions are "plaigerised from an "Insurer" then you have a time bomb ticking . One smart client or a big claim and you are finished. There are documented cases of partners bankruptcy due to this misconception.
Leave insurance to the Insurers.
Get your "beauty parade" organised pronto!

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By 2218842
15th Oct 2002 11:54

Keep away from self INSURANCE
The comments below are all noted and to an extent agreed. You need to be realistic about the risk and also the size of the practice, number of clients and complexity of work undertaken.

First, I would avoid any reference to 'Insurance'. There is no offer of insurance to clients. The concept is an annual fee for a promise - if an investigation should arise there would be no further fee levied by the practice for resolving the investigation to the best of its ability.

Second, the promise is therefore capped (best of ability / personal performance) and is intended to cover small to medium SA enquiries for low to medimum risk clients. Terms can explicitly state that the scheme does not cover SCO / complex investigations. This is still attractive to the small or medium sized client as such investigations are unlikely and fees for random queries etc are covered. The practice also has the power to propose whatever fee it wishes and accordingly has a tool to price out any client.

This is not a perfect solution for larger practices or higher risk clients / tax planning work etc. But, it does work for the sole traders out there......

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15th Oct 2002 14:19

Fee for a Promise
Oh dear already the concept is flawed.
A fee (premium) for a promise (indemnity) for something that might not happen ( an insurable event). Fee capped according to certain criteria (indemnity limit/ claims capping). And on it goes the minefield is well and truly entered! The DTI lawyers would have a field day with this concept.
Alternately one could take the view this is an annual fee for a service subsequently not required or provided, hmmm! advance fee fraud etc etc.
Good luck!

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By birdman
11th Oct 2002 16:57

Request to Simon Walton
As I do not have access to the publication you mention, could you perhaps summarise the pitfalls? As far as I can see, as a practitioner I would be receiving a regular, steady income rather than odd larger fees, which are the last thing a client wants after battling with the Revenue, and which often do not reflect the full time costs anyway! Also this fits in better with my (slow) attempts to move to a fixed-fee basis for bills.
Any comments positive or negative would be welcome.

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11th Oct 2002 17:19

Further help for Accountants
There is a helpsheet No.15 " Professional Fee Insurance" produced by CAASE (Chartered Accountants Advisory Service on Ethics). This should prove useful reading for the many Accountancy firms who have not yet considered this product for their client base

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14th Oct 2002 11:35

Tax Advisor Oct 2001
The article points us in the direction of helpsheet 15 as refered to by another contributor.
Specifically in relation to self insurance,the fact-

.Set up newco,with own accounting function.
.Newco must be authorised by secretary of
State to carry out insurance business.
.Admin involved in trading within a
regulated profession.
.Advised to take legal advise.

allowed us to quickly dismiss the idea!

Simon Walton

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11th Oct 2002 10:41

Be Warned
There was an excellent article by louise Pinfold in tax advisor(oct 2001).
She advises to steer well clear of any type of self insurance schemes.

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11th Oct 2002 15:40

Research
It's a lot of work, but my view is that you need to run a 'beauty contest' and compare the products offered by the different insurance providers. Policy conditions and exclusions are very important, and you need to meet the personnel at the offices of your favoured choice before committing yourself. A reputable company will put you in touch with satisfied policyholders.

I heard only yesterday at a conference that, in an enquiry, the Revenue assumes that any client has insurance, and therefore has limitless funds to deal with the investigation. This is nonsense, even if one is insured.

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By Anonymous
10th Oct 2002 16:05

By George, hes got it...
Well, it works very well for us. We created the product for our clients on very much the basis you describe - take up from clients is about 50%. General opinion is very black or white - they either love the idea or they think it is a waste of money. The good thing is, you make money from those who take it and you make money (ultimately) from those who don't because you can quite clearly say that they were warned when the investigation arises. No more fears about approaching the fee subject for investigation work.

I understand that there are negatives but you can reduce your risk against these by a good set of terms and conditions.

After the time and money that was invested in creating our own scheme, we have successfully resold the scheme as a template (£250 plus VAT per time) to other accountants who want to do it but don't want to spend their time reinventing our wheel. The fee gets you standard letters and most importantly the terms and conditions with the structure to implement it inhouse.

You need to be sure that you understand the downsides, but in a good year where there are no investigations it is work free income.

Anyone interested can contact Simon on [email protected].

Regards


Simon

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By Anonymous
09th Oct 2002 18:26

Attitude to risk...
Subject to your attitude to risk, skills available inhouse and size of practice there is the option to run this for yourself as an additional fee paying product.

If you provide an email, I can forward details.

Simon

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By birdman
09th Oct 2002 22:44

Simon, I am intrigued..
Say your practice has 100 clients with an average fee of £500 each.
Typically, 3% of clients would have an enquiry each year.
Full cost fee on a typical client would be perhaps 1.5x annual fee ie £750.
If you could get every client to pay £50 "insurance" to you, likelihood is you would be in pocket by £2,750!
Even 50% take up would be profitable.
Does anyone else have views on this, or actual experience?

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By gbms
09th Oct 2002 10:19

Various
There are a number of firms in this field. John Newth provided a list some time ago at: www.accountingweb.co.uk/item/12388.

Also, have a look at Investigation Zone, where you will find referenes to a number of fee protection companies, in particular PFP. If you type in "fee protection insurance" in the search engine you will discover there have been quite a few queries on this subject.

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