The Big Question March 2020: What can be done to help those providing professional indemnity products?

Peter Treloar, commercial underwriting manager, Hiscox

Making sure a client understands the breadth of cover they are getting with PI is important. Most clients will associate PI with cover for negligence, but it also covers breaches of copyright and other intellectual property, allegations of dishonesty and defamation. 

Another common misconception amongst clients is that PI is there only for when for when things go wrong. Of course this is important, but even where a client hasn’t done anything wrong, proving it can be expensive. PI will provide the defence costs to protect clients in these circumstances.

Finally, giving a tailored product to a customer will show that you as their broker, understand them and the unique challenges their industry faces.

 

Mark Ford, chief underwriting officer at Aqueous Underwriting 

It has become accepted practice on medium to large PI placements to complete a lengthy proposal form and prepare a detailed presentation. A different approach is required to improve efficiency and costs on micro and small business. E-trade portals are an obvious option and it is important to pick the right provider.  

Some offer legacy questions and limited appetite, but brokers want to know how much of their business will fit these portals. They can now find providers offering high fee/limit options. New offerings are available with targeted shortened question sets and wide appetite in the traditional professions such as accountants, architects, engineers, design and construction and property.  

Many providers have a take it or leave it approach and block the route to decision makers when all brokers want is access to an underwriter in the event a risk doesn’t fit the norm. There are exceptional solutions out there but pick your provider wisely.

 

Mark Brundell, head of professional indemnity at Zurich

Early engagement with your carrier and the customer or potential customer is key. Turn those soft market conversations around on their head and find out what has changed for them over the last 12 months, their challenges and what they are trying to achieve this year. It will give you an indication of any potential issues with renewals that you may be facing as well as what new opportunities may be possible. With your customer or prospect, manage their expectations.

All professions and firms involved in or with the construction sector face well-documented challenges. The ability to articulate this clearly to your customers will aid your retention chances and demonstrate your understanding of the underlying problems. Where feasible, arrange face to face meetings inviting underwriters to attend. After all, this is very much a ‘people’ business.

 

Keith Richards, chief executive at the Personal Finance Society

Regulatory intervention that was supposed to deliver certainty to professional indemnity insurance providers about their exposure to risk has only made the situation worse.

Cover being offered is including greater restrictions, increased excesses and premiums have soared resulting in financial advisers being unable to offer advice to consumers mandated by the Pension Schemes Act 2015.

As a result the Personal Finance Society (PFS) has renewed talks with the FCA and HM Treasury about whether professional indemnity insurance is fit for purpose for the regulated advice sector given the longevity of advice liability is misaligned with cover that is renewed annually.

The PFS has proposed an alternative solution to professional indemnity insurance. Instead of consumer compensation being paid from the current patchwork of professional indemnity insurance and levies to the Financial Ombudsman Service, Financial Services Compensation Scheme and Money and Pension service, it could instead be funded from both the market and a levy on retail assets.

The Personal Finance Society will continue to work with the government and wider PI market to lobby for provision of a more appropriate solution to the issues our membership faces.

 

Neil Ross, head of professional indemnity and media & entertainment liability at AXIS Insurance

The recent performance issues within the International Professional Indemnity market were cast into stark focus by the 2018 Lloyd’s Decile 10 review. This collective awareness of the need to drive performance within the market has set in motion a withdrawal of capacity and a firming of pricing.

Pricing improvements and rate adequacy are both welcome and needed; however, they do not address deeper structural issues within the market. Professional Indemnity is an important product that allows insureds to offer a wide variety of services to clients necessary for a functioning and healthy economy.

To set the market on a more sustainable path, all market participants need to push in the same direction in terms of structural reforms:

•  Underwriters – ensure pricing and terms and conditions will address customer needs while also delivering appropriate, sustainable returns

•  Insurers – continue price discipline to ensure consistency of marketplace

•  Brokers – provide an advisory service to clients by promoting best in class risk management/mitigation

•  Clients – be aware of the level of liability for work being assumed and ensure it is proportionate to the fee being generated. Pro-actively work to minimise risk and engage in the purchasing process to highlight this work