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Fee Protection Insurance - is it worth having?

Fee Protection Insurance

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We have had Fee Protection Insurance for over 10 years covering the whole practice, where we recharged the clients an amount based on their trading status (sole trader, partnership, limited company etc), with clients' having the option to opt-out.

Primarily, we took this on as peace of mind for our clients and ourselves, in case our clients had an enquiry and we needed support from a tax professional in case we were "out of our depth" on any complicated matter regarding VAT, IHT etc

In the beginning, most clients took it up, and we were "quids in", but in the past 4/5 years many clients have opted out of this, and it cost the firms approx. £400 a year net after recharge.

We have not had an enquiry in over 5 years, and it seems the only benefit we have of this is a free tax advice line, which to be honest, we get anyway with our membership of a professional body

My dilemma this year is, is it worth renewing our Fee Protection insurance?

Replies (16)

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Hallerud at Easter
By DJKL
29th Jul 2020 13:17

Are there other providers where there might be no cost to your firm?

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By Paul Crowley
29th Jul 2020 13:40

Would not choose to lose it, especially now. If needed just charge clients a bit more. It is for their peace of mind not yours. Similarly getting more drop offs.
My issue is risk of client not able to pay for an enquiry.
Every refusal to join in is usually along the lines of 'I have got nothing to hide'

Thanks (2)
bike
By FirstTab
29th Jul 2020 13:53

Not worth the premiums. I no longer have it.

Thanks (3)
By ireallyshouldknowthisbut
29th Jul 2020 14:27

i've noticed the drop in the number of enquiries.

Not had one for a while on 300+ clients.

I still make a margin on the fee protection however of £750 or so PA, but keep on barracking them to reduce the premiums given the lower level of investigations. I pay around £3k PA.

Must admit I have toyed with self insuring but its a big risk if I got a batch of clients investigated and I would have to let all my clients know about the change to the circumstances which could lead to cancellations.

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Replying to ireallyshouldknowthisbut:
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By Paul Crowley
29th Jul 2020 15:30

ICAEW does not like small firms self insuring.

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Replying to ireallyshouldknowthisbut:
By jon_griffey
29th Jul 2020 16:17

I seem to recall that there is some issue that you have to be an authorised insurance company to self-insure. There is a big difference between providing a warranty and covering the cost of an external event.

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Replying to jon_griffey:
By ireallyshouldknowthisbut
29th Jul 2020 17:50

@Paul & Jon, thanks for the nudge. I recall some 'gotchas' on this one and would need to look at in detail if I go down the cancel route.

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By Justin Bryant
29th Jul 2020 14:35

When HMRC invests so much of their resources in dealing with c£100 penalties and crazy IR35 cases it is hardly surprising that your clients (and probably most other people's clients) have had no enquires in 5 years.

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My photo
By Matrix
29th Jul 2020 17:25

You could change the insurance from a whole practice cover to a client by client basis. More admin but get a quote since there may be a few clients who want to retain it.

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Replying to Matrix:
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By Paul Crowley
29th Jul 2020 21:19

Rarely worth it unless take up really small. We used to get prices on both bases up until about 5 years ago. Always overwhelmingly cheaper to insure the entire practice.
Sellers have the same massive time waste just receiving the regular changes as we have preparing them.
We have not claimed and will not claim on anyone who does not contribute. Client pays. ICAEW rules clear that not permitted to charge client and insurer.

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Replying to Paul Crowley:
My photo
By Matrix
29th Jul 2020 21:31

Our take up was so small that we insure on a client by client basis. We only offer to clients who already have it these days. We don’t offer it as standard as the admin would be too high in adding clients during the year.

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Replying to Matrix:
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By Paul Crowley
29th Jul 2020 23:21

It is a bit of a pain but we have in the past always pushed it and get a good take up. We always mention in pricing, the fee as an option.
70% of trading companies, over 50% of self employed take it up
Yes I agree the admin is a cost. We only give up if a newby ignores three years of invites.
I also mention it in passing at most interviews with non contributers for the first three years

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RLI
By lionofludesch
29th Jul 2020 18:10

I had a bad experience many years ago with a company weaseling out of paying out on the grounds that the books - which they'd never seen - weren't good enough. I took the case on myself and we won hands down, bar some minor face-saving adjustments to private motoring.

Insurers still wouldn't pay out - the claim was for about £300, which was modest even 35 years ago - so I told them to shove their business and never considered recommending it again.

I couldn't understand their attitude. They'd've lost out big-style even over twelve months. Their attitude seemed to be to cave in to HMIT (as it was then), do no work and, if the taxpayer had to pay some extra tax, well, that wasn't their problem.

Basically, I didn't trust them any more.

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Replying to lionofludesch:
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By Paul Crowley
29th Jul 2020 21:31

We have only had one refusal. But the directors admitted that they had sold machinery and pocketed the cash. Later they also admitted that they keep the cash from scrap metal.
These directors even then, 15 years ago, were getting over £1millon per year from the company.
Insurance paid our fees up to date of first admission of wrong doing.

We have used five different suppliers over the years. The service and approach can be markedly different.

We now use PFP

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By meadowsaw227
04th Aug 2020 10:37

We have had whole practice for years through Croner Taxwise, currently costing circa £2k pa and to date have never charged the clients for this.
No claims for a few years and they were only small aspect enquiries.
We just look on it as a service provided.

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Moore Accountancy Altrincham Accountant
By smooreaccountancy
04th Aug 2020 13:31

We do it on a client choose basis and PFP do all the marketing, etc, so it is minimal input from us.
Less than 10% of clients choose to pay for it

Thanks (1)
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