Leaving a Firm / Starting Your Own
Leaving an established firm to start your own practice is a big move. You’re juggling client transitions, new systems, branding, staff – and somewhere underneath that pile sits a less glamorous question:
“What happens to my professional indemnity insurance when I walk out the door?”
At your old firm, PI cover was just there in the background. Once you step into your own practice, you need to be sure there’s no gap – for past work or for the new files you’re about to take on.
Two different issues: past work vs future work
When you’re separating from a firm, PI insurance isn’t just one decision, it’s two:
Cover for historic work at the old firm
Will the previous practice maintain cover that responds to claims arising from work you did while you were there?
Cover for new work in your new practice
Who is insuring the advice you’ll be giving once you’re on your own?
These questions matter because claims don’t always appear neatly in the same year the work is done. A piece of advice you gave two years ago can come back as a dispute once the client’s circumstances change or a regulator takes a closer look.
Clarify what your old firm is doing about PI
Before you finalise your exit, it’s worth having a clear, calm conversation with the existing firm or partnership about PI. Key points to clarify:
Will the firm maintain ongoing PI cover?
If the firm will continue trading, will its PI policy respond to claims involving work you did while there?
Is there a run-off arrangement?
If the firm is winding down, has it arranged run-off cover and for how long?
How will you be included?
Are you specifically named or covered as a former partner/director, and for which period?
You’re not trying to re-negotiate the whole policy – just making sure you understand who is responsible for what, so you can plan your own cover properly.
Setting up PI for your new practice
Once you know how historic work is handled, you can focus on insuring the practice you’re about to build.
When you apply for PI for your new firm, the insurer will typically ask about:
Your new firm’s structure and services
Sole practitioner, partnership, company? Tax, SMSF, advisory, virtual CFO, consulting?
Your experience and claims history
Years in practice, seniority at the previous firm, any prior claims or incidents (even if handled by the old firm’s insurer).
Expected fee income
A realistic estimate of fees for the coming year, not your ultimate growth vision for year five.
The benefit of working with a specialist PI provider for accountants is that you’re talking to people who see this scenario all the time – partners leaving, senior staff spinning out, boutique firms emerging from larger practices.
Common pitfalls to avoid when switching
There are a few traps that can catch even experienced practitioners:
Assuming you’re automatically covered for past work
If the old firm reduces cover, changes structure or ultimately ceases, you want to know how that affects you.
Leaving a gap between policies
PI is usually written on a “claims-made” basis. Gaps between policies can create uncertainty about which insurer is responsible.
Underestimating your service mix
If you’re planning to “do a bit more advisory” in the new practice, make sure that’s reflected in your PI application.
Taking the time to get clear on these now is usually far cheaper than the time and cost of a messy claim wrangle later.
Why many accountants stick with one PI provider
Once you’ve chosen a PI provider that understands accountants, there’s a strong incentive to stick with them:
You don’t have to re-explain your practice every year
They understand how your services and structure evolve
You’re not losing hours each renewal shopping around to save a small amount on premium
For many practitioners, their PI premium ends up being less than their car insurance – which makes investing two or three hours in hunting for tiny savings a questionable use of time.
How Abacus supports practitioners making the move
Abacus has worked with many accountants who’ve left larger firms to start their own practices or boutiques. Our focus is to:
Help you clarify what you need covered (services, entities, key people)
Set an appropriate limit of indemnity for your new practice
Make the application and renewal process as efficient as possible, so you can focus on winning and serving clients
We can’t tell you how to structure your partnership exit, but we can help you understand how your PI fits into the bigger picture and what your options are for insuring your new practice going forward.
If you’re planning a move in the next 3–12 months, it’s a good time to start the PI conversation – before you announce your departure and your inbox fills up.
