How has the Professional Indemnity market changed?

Professional indemnity (PI) is an insurance cover that protects against losses that could come from legal action against you if you are deemed to be found to be negligent, or giving wrong advice through error or omission. This could also include slander, libel or breach of contract depending on your insurer. PI cover can be important for businesses that provide advice, recommendations, designs or represent others’ needs.

Insurance experts have recognised that the UK market for PI has hardened in recent years, making it difficult for some businesses to find adequate cover. The Grenfell tragedy and Carillion’s collapse made conditions for PI in the UK difficult, with many insurers deciding to no longer offer PI cover and focus on other products.

Carry on reading to see how the PI market has changed and how you can continue to secure the level of PI cover that you need.

An insurance market is considered hardened when a cover is in high demand but suppliers are low. Major disasters, unexpected insolvencies and broken supply chains have contributed to a large increase in PI claims.

This increased volume of claims has meant that insurers have had to pay a hefty price, with a limited financial supply. Experts have estimated that because of this, half a dozen insurers have exited the PI market in the last year alone, however, no new insurers have taken their place, nor are any expected to in the near future.

Insurers who have remained in the PI market have taken measures to limit their exposures and reduce the risks of paying out costly claim settlements, which include:

• Requesting additional information: Before your renewal, your insurer will likely ask for more detailed information regarding your business operations, supply chains and how you manage risk.
• Charging increased premiums: Insurers lost a lot of their profits from claims arising from recent tragedies, disasters and other professional negligence exposures. Because of this, they have had to increase the premium rates to ensure that adequate cover can be provided.
• Applying cover restrictions: As policies near their renewal date, insurers have imposed more restrictions on policies such as limiting cover to a single aggregate amount, imposing a higher excess, excluding consequential or economic losses and removing some extensions, such as cyber cover.

Get the best cover for your business in this harder PI market by doing the following:

• Communicate with your insurance broker: Get in touch with us at Premierline to talk about what it is that you need from your PI cover. As a broker, we can advise you on the cover that is best for your business and can usually offer this at a more cost effective solution.
• Start your renewal research early: Know when your renewal is due so that you can secure the best cover when the date comes around. Being prepared with your renewal is very important in a hardened insurance market. Make sure that you have any documentation that you may need on hand and be prepared to answer more questions than you have done previously.
• Risk management: Your risk management approach will be vital information to your insurer to show that you are a low risk business when it comes to PI. Invest in risk management processes and be prepared to give documentation to your broker or insurer when the time comes to renew. Risk management documentation should highlight:

1. Risk analysis activity
2. Cash flow processes
3. Robust contracts that clearly outline the responsibilities of all parties
4. An effective supply chain management process that outlines your relationship with your supplier, due dilligence checks and liability agreements.