Talking Tax: May 2022
Author: Mike Scales, TFPI Director
There are several TFPI providers in the accountancy practice market. Even within the four main insurers, the variety of cover and services vary, sometimes quite dramatically, especially to the trained eye.
This is where Zeal TFPI comes in … But what constitutes a “good” TFPI scheme?
Tax Fee Protection Insurance (TFPI) is something all accountants should have in place to protect their practice and their clients … but what constitutes a “good” scheme in the first place? Let us first just summarise the reasons to have a scheme:
> Recovery of Professional Fees.
Protect your fee income and earn what you should for your professional expertise. Fix the potential income and cost for the practice.
> Client Retention.
Protect your client relationship. Extra professional costs take a toll on any relationship. Fix the cost for the client.
> Client Protection.
HMRC are on a mission to recover the Tax Gap and recoup Covid19 furlough costs … and every taxpayer is at risk of an enquiry or investigation.
> Practice Assistance / Helplines.
Technical helplines add value, especially for smaller practices, expanding knowledge and client serviceability.
> Practice Income Generation.
Dependent on the on-sell mechanism and charge-on regime, a TFPI scheme can be a very decent revenue stream.
> Best Practice.
It is simply the right thing to do for clients, as recommended by all of the accounting bodies.
There are many parts that make up a scheme – cover provisions, administration, marketing support, technical helplines and yes, importantly, the premium.
Let us tackle the last point first:
Premium Cost. Whilst the old adage of you get what you pay for is very often the case, it is not always the case with insurance providers. It depends very much on the underwriting capability, claims experience and profit margin wanted by both the underwriter and actual service provider (they are two separate entities). One of the best schemes around has the best pricing model, with the best cover, and support services that are equal to or better than many opposition providers. Another is mediocre at best but is more expensive than most. Too many schemes are overpriced and not underwritten correctly i.e. to actual claims experience profiles. It is most important to have a financially secure insurer that backs up the scheme offering in the first instance.
Cover provision is of course vital. Many schemes look great from the advertised headline value and main events covered but fall apart in the small-print. Inner limits on certain events (very often in the most popular claim areas), with specific exclusions further depleting the actual coverage. All too often this is only discovered at the claim stage. Unfortunately, the marketing blurbs provided by some insurers overpower potential clients, or the buyer simply does not understand or read the definitive policy terms and conditions.
Good Administration and Marketing Support of the scheme is required as well. This applies to everything relating to paperwork (it is after all an insurance based service), premium collection, client data, service provisions and actual provision of marketing support, and being FCA compliant.
Technical Helplines are one of the biggest reasons smaller practices have a TFPI scheme, as these services are for the most part inclusive within the quoted premiums. They add huge technical ability and knowledge to most practices, regardless of size (often for a second opinion). However, the actual knowledge base varies quite wildly between providers, so the consumer needs to understand that just saying the scheme has helplines does not always equate to valuable trustworthy advice. Recent developments from some providers is to start charge for these services directly, or off-set them onto electronic based helplines (at a cost). Providers have now seen that technical tax support is often more profitable than just the insurance. Watch out, this can become expensive if you are unaware of the services being provided as inclusive or not.
So, to answer the question, it is a mixture of five different points. The best scheme is a workable and decent melding of all of those points, something which few providers actually attain in one offering.
At Zeal Tax we have a dedicated TFPI specialist team which will review the market and show the potential best fit for your practice. Contact email@example.com / 07776012995.