Professional indemnity insurance changes affecting electrical contractors

How much professional indemnity insurance do I need?

1 June 2020 saw a change to the Private Rental Sector (PRS) that offers greater protection for tenants but also presents opportunities for electrical contractors. New regulations introduced by the government require landlords to have electrical installations in their properties inspected and tested by a qualified and competent individual at least every five years.

This means landlords are now required to have electrical safety checks carried out as follows:

• From 1 July 2020, all new specified tenancies will require an electrical safety check to be in place.
• From 1 April 2021, all existing specified tenancies will require an electrical safety check to be in place.

Landlords must be able to provide a copy of the electrical safety report to their tenants, and their local authority if requested.

What does this mean for electrical contractors?

When selecting a qualified and competent inspector and tester, landlords can either:

• Use a contractor listed on the PRS Register electricalcompetentperson.co.uk

or

• Find a competent person using a checklist covered in the MHCLG (Ministry of Housing Communities and Local Government) Guidance.

Because landlords will be driven by the government to use registered businesses, these changes present immediate opportunities for electrical contractors operating in this sector.

Do I need professional indemnity insurance as a contractor?

Accidents happen, and despite best efforts, sometimes things can go wrong – even for the most experienced contractor. In those situations, having the right contractor professional indemnity insurance in place will provide valuable peace of mind concerning work undertaken both past and present, protecting your livelihood. 

For example, if a fuse-board installed on the day a liability policy was due to expire was then subject to a malfunction the following day, this would result in an invalid claim. The date of the loss would be the date the damage happened, not the day the board was installed. 

This is not the time to cancel your insurance

As with many sectors and trades, the impact of the COVID-19 pandemic on electrical contractors has seen workloads significantly reduced, or even stopped. However, this is no reason to cancel valuable insurance cover. Maintaining your contractors insurance cover is now as important as ever, rather than taking the risk and leaving yourself exposed.

Even if you're not currently working, you may still face claims for work completed in the past. Maintaining your professional indemnity cover will protect you if a customer makes a claim against your business concerning an error or omission in your expert advice and services. A lack of protection could leave you facing legal fees and compensation costs that may be disastrous for your business.

Prepare yourself for PRS opportunities

To be an approved contractor, registrants must confirm they meet all PRS scheme requirements[ii]. These requirements include having the correct professional qualifications, complying with best practice guidelines and holding at least £250,000 professional indemnity insurance covering Electrical Installation Condition Reporting.

Sources and further reading:

[i] https://www.gov.uk/government/publications/electrical-safety-standards-in-the-private-rented-sector-guidance-for-landlords-tenants-and-local-authorities/guide-for-landlords-electrical-safety-standards-in-the-private-rented-sector

[ii] http://www.niceic.com/join-us/private-rented-sector-scheme