How to Present your Risk Management Strategy to Insurers in 2021

It is safe to say Covid-19 has upturned the risk landscape for accountants. New risks have presented themselves and all businesses have had to adapt processes, procedures and risk management strategies to keep up.

Even before the pandemic, finding insurers to underwrite PI Insurance for accountants was becoming more difficult due to hard market conditions. So, now more than ever, accountancy firms need to find ways to appeal to insurers, who are scrutinising how firms are understanding and managing new and existing risks in a post-Covid world.

This is why it is paramount not to underestimate the importance and impact of clearly and correctly completing any forms sent to you by your insurer. The way you present your business to insurers could make all the difference when finding cover for your accountancy firm.

Surprisingly, Insurers complain that they see many accountancy firms that clearly have not spent much time completing their forms. This costs firms money in the long run as, without giving a good account of themselves, their premiums are likely to be higher.

In the following article, I would like to provide some pointers to help you present your business and risk management strategy to insurers at your 2021 renewal.

How to use the proposal form to your advantage

Insurers view the proposal form as a window into your firm. If it isn’t clear, hasn’t been completed properly, or hasn’t been given much thought, perhaps the work you’re asking them to insure is similar? Put yourself in Insurers position just for a moment and consider your answers – what would you make of them?  

You should think of completing the form a bit like taking an exam – if you want an A* (which would translate to the right cover at the best price) each question should be answered as fully as possible. The form also needs to be tidy, presentable and easy to read.

You don’t need to follow the question order in the proposal form

You don’t just have to complete the risk management form question by question with yes/no answers. If you have a comprehensive risk management handbook or portal that includes all of your processes and protocols, then show this off!

As long as you include all of the information insurers are asking for, then present it in the way you think best – but don’t make it too difficult to read. Set out your details so that Insurers can easily see the procedures you have in place to protect your firm (and also them), from claims.  It’s not possible to legislate for every eventuality, but if you can easily demonstrate the lengths that you go to protect yourself then flaunt it.

Insurers care about how you run your business

Insurers aren’t just interested in knowing about your business activities, although these are fundamental. They are also interested in understanding how your company is run, as this can often tell a lot about a firm’s potential PI exposure. It is important to include information around this, for example, do you have regular committee meetings, how often do you meet and is there a formalised structure? A formal process often means decisions will be handled more effectively and things will keep moving forward.   If you don’t have a written procedure; consider putting something together just for your insurers so that they can get a better understanding of how you run your firm.  Flow charts, tables etc. are good – anything easy to read which gets the message across.

Think of your proposal form like a C.V. or a client pitch

In a C.V. or client pitch you look to convey all of your capabilities in the most impressive and succinct way. A proposal form is no different. In the current market why should an Insurer underwrite your risk?

Ensure you provide all the detail they ask for as well as any additional processes, policies and procedure information. If you have had the misfortune to have a claim, tell Insurers what the firm has learned from that, how procedures have changed, why it shouldn’t happen again.  Have you changed anything in other areas of your firm as a result?  If it looks like too much information, you could add in an appendix at the end just with a summary within the form. 

Covid-19 – what do insurers want to see?

Clearly insurers will want to see how your business has adapted to the new risks presented by Covid-19.  Below, I have provided a summary of the key risk areas for accountants. Insurers will want to know which processes and procedures you have in place to manage and protect yourself against these risks. If you have prepared a Covid-19 risk management strategy document then be sure to include this within your proposal form.

Cyber security. One of the largest risks coming out of the pandemic is cyber security. Unfortunately instances of hacking have increased due to employees working from home. Insurers will want to know what steps you have taken to try to prevent this:

• How are your systems set up to prevent cyber-attacks?
• How do you store files? If electronically, how and what systems do you use?
• Will systems be put in place for working from home permanently? Post-Covid this will still be important, as there is a shift towards flexible working patterns.
• Do you have a cyber-insurance policy in place to help protect you?

Employee management. It is thought we are likely to see Employment Practices Liability (EPL) claims increase post-Covid, so insurers are interested in understanding how you are supporting your employees during this time.  A well informed, supported workforce will in general have less PI claims:

• Is working from home an option for all employees, in line with government guidelines?
• Do you regularly check in with staff working from home?
• Do your employees have access to any stress and support helplines?
• How has your firm prepared to manage possible significant staff absences as a result of Covid-19?

Audits. If your firm conducts audits, insurers will be interested to understand how you are fulfilling your obligations in line with the latest government advice:

• How are you conducting audits if you cannot attend client premises, what policies and procedures do you have in place?
• How are you communicating these policies and procedures with clients to ensure you are compliant?

Firm projections and plans. Many accountancy practices are struggling and unfortunately there are some that, sadly, will not survive. Insurers are keen to understand how your firm is running and how you have adjusted your plans for the future:

• Have you made any staff redundant, or are there any plans for redundancies in the future?
• What are your firm’s projections? When did you last review these projections, and have they been pushed back due to Covid-19?
• What do you see as the best and worst case scenarios for post-Covid?

Furlough. Insurers are starting to see a number of fraudulent furlough scheme claims, meaning they are particularly interested in knowing whether you have done any work for clients regarding the implementation, facilitation or claiming of benefit/funds or provided any tax advice in respect of the government furlough scheme. If the answer is yes, insurers will have a number of questions:

• Background information on the companies you have acted for in this respect?
• What risk management measures you have put in place to make sure, as best as possible, these claims are not fraudulent?
• Have you updated your terms and conditions or letters of engagement to limit your liability?
• Have you conducted a risk analysis?

Insurers understand that the better a proposal form is completed, the more likely the firm understands their risks and has accurately reflected this within the proposal form. Ultimately, the better a risk is understood, the better it will be managed, and the less likely you are to have a claim.

We are living in difficult times, where the risks facing accountancy firms are increasing, and the accountants PI insurance market is hardening. It is more important now than ever to analyse your risk management strategy, make changes to it if necessary and ensure you have all the information prepared to present this in the best light to insurers.

At Howden, we are here to help you. We can provide you with guidance when completing your insurance proposal form, give you expert knowledge on what insurers are looking for and provide you with continuous risk management advice. We also have an award winning Employee benefit consulting team which can help you with your staff strategy to get through these difficult times.   If you have any questions please do not hesitate to get in touch.