‘Leveraging indemnity insurance could hedge property professionals against risks’

Property professionals, like others in other fields of human activities, are exposed to risks which are, in some cases, unavoidable and fall out of their activities or operations. These risks which experts define as “possibilities of losses or injuries” come through their internal, strategic or external operations.

The  experts say these risks could be mitigated through a management instrument called professional indemnity insurance  which was created in the 1700s to give professionals such as accountants, architects, surveyors, engineers etc and their families some needed financial protection.

“Essentially, professional indemnity insurance is an insurance product designed for professional people and organisations which covers them in the eventuality of certain outcomes in the course of their usual business practice”, explained  Victor Alonge, Senior Partner at Nelson Thorpe Alonge, who spoke at the Business Luncheon/CPD Programme of the Royal Institution of Chartered Surveyors (Nigeria Group) in Lagos.

Alonge,  who presented a paper titled ‘Professional Indemnity Insurance and the Property Profession in Nigeria’ at the luncheon, explained further that this insurance product covers such things as professional negligence, errors or omissions, breaches of professional duty or conduct and civil liabilities.

In the light of the above, it becomes important for property professionals to leverage this product to hedge against the many risks which they are exposed to in the course of providing services for their clients which sometimes cause them to lose money or suffer reputational damage.

“Having an insurance policy that covers us for our work is important because allows us to offer our services without having to build in the potential costs of any liability we might face in the future directly into our fees. This means that we can be covered for contractual stipulations that might go above and beyond the normal legal expectations. For instance, indemnity insurance might cover financial loss due to late delivery or other arrangements post-sale”, Alonge informed.

Furthermore, the indemnity policies can also cover some or all of the legal costs and compensation that might be incurred as a result of a proceeding being made against a professional for his conduct and Alonge mentioned that for a estate valuer, the insurance may cover financial losses incurred  by clients as a result of proven negligent valuation resulting in either over-valuation or under-valuation.

 To a quantity surveyor it may cover financial losses incurred in the preparation of tender bills resulting in the award of over-priced or under-priced contracts, and contractor over-payment due to negligent valuations.

He argued that without such policy, professionals are exposed to more business risk and may need to put their prices up to account for such risk. “But with professional indemnity insurance, we are covered against many undesirable business outcomes and can often operate more competitively, as a result”,  he assured ”.

Challenging his colleagues to leverage this product for its many benefits, Alonge also sued for the determination and political to embrace and sustain it, believing that the real estate industry was ready for the scheme.

“Government, through our regulatory boards, should consider and adopt, without further delay, mandatory professional indemnity insurance policy as tool for enforcing professional competence and public interest protection. The policy is capable of ensuring that practitioners act within the limit of their professional expertise, as evidence shows that lack of expertise is one of the common causes of professional indemnity claims”, he advised.

Continuing, he said, “professional indemnity insurance will also ensure that practitioners act with care and due diligence, encourage intra and inter professional collaboration and cooperation. It would also reduce inter-professional conflicts and unhealthy rivalry”.

He hopes that this will ensure that practitioners take their professional development seriously, as practitioners would have to be up-to-date in their areas of professional practices to avoid falling into the professional negligence and incompetence claims trap.