22/06/2020
Navigating Professional Indemnity Insurance in a hardening market
Do you need professional indemnity insurance?
If your organisation represents the needs of others, offers professional advice, educated recommendations or design solutions, P.I cover is especially critical for you. Professional negligence, errors or omissions, slander, libel, and breach of contract can result in legal action leading to financial losses. Professional Indemnity Insurance (P.I) offers you ‘cover’ to protect against such losses.
What else do you need to know about the current P.I market?
Insurance experts confirm that the UK’s hardening PI market has made it increasingly difficult to secure adequate levels of cover.
A surge in demand for P.I cover has resulted in a major market fluctuation, leaving insurers to pay (from limited financial supplies) the hefty price tag of additional claims. Insurance experts reveal that along with the surge in demand, the P.I market has lost half a dozen insurers in the past year and without new insurers expected to take their place soon! To limit exposure and reduce their risk of continuous costly claim settlements, any remaining insurers have had to implement a variety of measures.
What are these additional measures?
REQUESTING ADDITIONAL INFORMATION
Before renewal time, insurers are asking the client for more detailed information regarding their business operations, supply chain processes and risk management methods. In doing so, they significantly lengthen the time required to generate proper terms and determine an updated policy.
HIGHER PREMIUMS
To compensate for lost profits from a growing number of claims, many insurers have increased their premium rates—forcing organisations to pay additional expenses for adequate cover.
COVER RESTRICTIONS
Upon renewal, many insurers have implemented serious restrictions such as limiting cover to a single aggregate amount, imposing a higher self-insured excess, excluding consequential or economic losses, and eliminating various policy extensions (eg cyber-liability cover).
How to make sure you have adequate P.I
Despite the harsh implications of the hardening PI market, the following guidelines can help your organisation maintain adequate cover:
COMMS COMMS COMMS!
Communicate with your broker to discuss what level of cover and unique policy features your organisation needs. Your broker has the insurance expertise to provide you with the most cost-effective, high-quality solution. During these market conditions, ensuring frequent communication with your broker will help you stay informed, supported and adequately covered.
DON’T HANG ABOUT!
In a hard market, you can’t wait until the last minute to secure quality cover. Engage with your renewal process as early as possible. Doing so will give you plenty of time to gather any documentation required for renewal. Remember the additional ‘measures’ being implemented? One of them is being asked more questions than usual, so plan to start earlier; this will pay dividends in the final stages.
MANAGE YOUR RISK
Now more than ever, it’s vital to invest in a robust risk management process. Upon renewal, provide your insurer with the relevant proof/documentation. Your risk management documentation should highlight:
Proper cash flow processes
Seamless client contracts with clear roles and responsibilities
Effective supply chain management (eg positive relationships with suppliers, due diligence of supply chain risks and well-distributed liability agreements)
Mitigation of on-site risks with robust internal practices and standards
I would be delighted to provide an alternative at your renewal or indeed happy to help give advice where possible.
Kevin. [email protected]
