The Rising Complexity of Professional Services Risk: What Large Firms Must Prepare for

Posted by Valerie Lawrence, Head of Professional Indemnity, Kerry London Ltd

The professional services landscape is changing quickly. For large firms across legal, consultancy, finance, engineering, construction and technology, the risk environment is becoming more complex year on year.

As we move through 2026, a combination of regulatory change, economic pressure, evolving client expectations and the growing use of artificial intelligence is reshaping professional indemnity risk. What was considered sufficient Professional Indemnity (PI) insurance cover even a few years ago may no longer reflect the real exposures firms face today. 

For businesses operating at scale, the challenge is not just understanding these risks, but making sure their Professional Indemnity insurance keeps pace. Gaps in cover, unclear policy wording or outdated assumptions can leave firms exposed when it matters most. 

Staying protected now requires a more considered approach – one that reflects how modern professional services firms operate, the complexity of their advice, and the increasing scrutiny from clients and regulators alike.

1. Diversifying services is expanding Professional Indemnity risk

To stay competitive, many firms are broadening their services. While this creates opportunity, it also increases professional indemnity exposure. 

As service lines expand, so do the risks. Firms are taking on more complex work, often across multiple disciplines, which can blur responsibility and increase the likelihood of errors or omissions. 

For larger firms, this often means: 

• More complex contractual obligations and liabilities
• Increased risk of gaps in professional indemnity cover
• Greater exposure to cross-departmental claims
• Heightened client expectations around accountability and delivery

From an insurance perspective, this makes standard PI policies less effective. Professional Indemnity insurance needs to be tailored to reflect the full scope of services provided, not just core activities.

2. AI is changing the nature of professional liability

Artificial intelligence is now embedded in many professional services. In 2026, its role will be even more prominent – moving from back-office efficiency tools into client-facing advice and decision-making. 

This shift is significant for professional indemnity risk. When AI-generated outputs lead to an error, the liability still sits with the firm. 

Emerging risks include: 

• Incorrect or misleading AI-generated advice
• Algorithmic bias impacting outcomes
• Lack of transparency in AI decision-making (“black box” risk)
• Outputs that fail to meet regulatory or professional standards

For firms, this creates a new layer of exposure that traditional PI policies may not fully address. It also increases the need for strong governance, clear accountability and insurance cover that responds to technology-driven risks.

3. Economic pressure is increasing claims activity

Economic conditions continue to play a major role in professional indemnity claims trends. When markets tighten, claims tend to rise. 

Clients are more likely to challenge advice, question outcomes or seek to recover losses through legal action. At the same time, firms are operating under pressure -managing costs, protecting margins and delivering more with less. 

This environment increases the likelihood of disputes and claims, including: 

• Challenges to fees and service delivery
• Disputes over project delays or cost overruns
• Increased third-party claims, not just direct client claims
• Greater scrutiny of professional advice and outcomes 

For large firms, this reinforces the importance of robust Professional Indemnity Insurance that responds quickly and effectively when claims arise.

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Kerry London is authorised and regulated by the Financial Conduct Authority. The company is a leading UK independent and Lloyd’s registered broker, which means that we work with a wide range of niche and major insurers.

This note is not intended to give legal or financial advice, and, accordingly, it should not be relied upon for such or regarded as a comprehensive statement of the law and/or market practice in this area. In preparing this note, we have relied on information sourced from third parties, and we make no claims as to the completeness or accuracy of the information contained herein. You should not act upon information in this bulletin nor determine not to act without first seeking specific legal and/or specialist advice. We and our officers, employees or agents shall not be responsible for any loss whatsoever arising from the recipient’s reliance upon any information we provide herein and exclude liability for the content to the fullest extent permitted by law.