Retroactive dates on professional indemnity insurance policies

Understand their purpose and beware of pitfalls

Most professional indemnity policies will incorporate a retroactive date and this will generally be the date from which you have held uninterrupted professional indemnity cover; ideally this should also coincide with the date you started to provide professional accountancy services.

The purpose of the retroactive date is to exclude claims arising from any work undertaken or advice given priorto the specified date. It is therefore important that any retroactive date shown is the date that you started practicing, so that all the work you have completed in the past will be covered.

The retroactive date is usually shown on your policy schedule or by way of an endorsement and can be stated in in a number of ways:

  • Unlimited retroactivity – policies underwritten on an unlimited retroactivity basis will respond to a claim reported to the insurer during the policy period regardless of when the work was undertaken or advice given.
  • Retroactive date – none – this is very similar to unlimited retroactivity; policies underwritten on this basis will respond to a claim reported during the policy period regardless of when the work was undertaken or advice given.

Both the above terms will cover all your past work.

  • Specified retroactive date (for example, retroactive date, 9 June 2009) – this means that any work undertaken before 9 June 2009 will be excluded from your policy. If the retroactive date specified is later than the date you started to practise, you can ask your insurer to change it, but they may make a one-off premium charge to do this.
  • Retroactive date inception (RDI) – this means that any work undertaken or advice given before the start date of your policy will NOT be covered; this is only acceptable if you are just starting to practise and have not undertaken any work in the past. Some insurers will apply RDI if there has been a gap in cover; it is possible to remedy this by asking your insurer to apply the correct date and they will probably charge a one off premium to do this.

When you are renewing your professional indemnity insurance, and especially if you are changing insurers or broker, it is important to check that the retroactive date is accurate. 

Beware of insurance providers offering very competitive premiums with a ‘retroactive date inception’. The premium is attractive because none of your past work will be covered and there is little risk to the insurer.