A $1 million sum insured is no longer adequate for many Professional Indemnity or Directors & Officers Liability policies – these days you generally need at least $5 million.

The time is past when a $1 million sum insured is adequate for most Professional Risks policies.

For more than 20 years, for small to medium-sized professional practices, this sum has been considered a reasonable limit for Professional Indemnity, Directors & Officers Liability and Management Liability policies. But a significant number of claims are now exceeding $1 million, even for Insureds with annual fees/revenue much less than that amount. A review of CGU Professional Risks’ claims records shows that, of our 46 largest claims:

• 16 incurred (i.e. claims yet to be finalised) amounts are equal to or exceed the policy limit, and
• 11 of these claims were on policies with a sum insured limit of $1 million or less.

The corresponding fee income of these insureds is also well below $1 million, showing that fee income is not a reliable indicator of an appropriate sum insured.