The minimum indemnity limit required of the agency rises with the agency's size
A worked RES examination question on keo and agency licensing, from our Paper 2 bank — with the rule it turns on, and why each of the four options is right or wrong.
The question
Horizon reviews the professional indemnity (PI) insurance held across its salespersons and the agency itself.
- (i) Every agency and its salespersons must be covered by professional indemnity insurance.
- (ii) The insurance protects against claims of professional negligence.
- (iii) For a small agency, professional indemnity insurance is optional — a purely commercial decision.
- (iv) The minimum indemnity limit required of the agency rises with the agency's size.
The answer, and why
Answer: D
The rule. Professional indemnity insurance is mandatory for every agency and its salespersons and protects against claims of professional negligence; it is not optional. The minimum indemnity limit required of the agency rises with the agency's size.
Why D is correct. (i) the mandatory cover, (ii) protection against negligence claims, and (iv) the indemnity limit rising with size are correct. (iii) is false — the cover is not optional for a small agency.
The other options.
- A adds the false (iii), optional cover for a small agency.
- B drops the mandatory-cover point at (i).
- C drops the negligence-protection point at (ii).
Exam note. PI cover is compulsory, not commercial; the agency's required indemnity limit scales with its size.
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