Professional Indemnity Insurance (PII) update

The outbreak of COVID-19 has created an unprecedented situation and added another layer of uncertainty in the Professional Indemnity Insurance market.
 
Insurers underwriting PII for surveyors had to adjust quickly following the Lloyd’s ‘Decile 10’ review in 2018, which led to continuous premium rate increases and much less capacity.
 
The surveying and valuation profession has long been an area of focus among insurers, ever since the events of the UK property downturn in 2008 when surveyors became the target of significant litigation.
 
Whilst we can only wonder what impact there will be on the UK property market from here onwards, we do believe the risk landscape in surveying and valuing has improved since 2008. There is much to be said that claims as a result of a new property downturn would not escalate to the level we saw a decade ago, not least thanks to the positive impact of legal reforms, the evolving role of the panel manager, better risk management processes and the use of technology in the valuation process.
 
Insurer appetite for valuation work performed for secured lending has always been limited, but the market for surveyors and valuers is now even smaller.

Lloyd's of London have said that “growth needs to be secondary to performance” and so Insurers are under no obligation to accept new business. Any new business they take on, will be because they can wholly justify doing so and to enable that, firms risk profiles need to be presented in the most positive and comprehensive way at the outset of any renewal discussions. If not, Insurers are now more likely to simply decline to offer terms. It is critical to evidence the good measures that make your firm a suitable and profitable risk for insurers to accept.

Our considered view is that we are likely to see further hardening of the PII market beyond 2020 and so firms should be prepared and budget accordingly. We are not currently aware of any pending insurer departures, but the prompt departure of some insurers in the last 18 months reminds us to keep this under a watchful eye.

How to prepare for renewal in the current climate

We strongly advise firms to start the process early. In a hard market you will not achieve a better deal by leaving your renewal to the last minute. With pressure on appetite and capacity, leaving renewal to last minute could find your firm in a very difficult situation.
 
Proposal forms always take longer to complete than you expect. Set your time line carefully and give clear deadlines for delivery when you need to collect information from others in the firm. It is also important to stay in touch with your broker, who will be able to keep you updated on what is happening with your insurer and in the market generally.

Renewal Checklist

To assist you to navigate the forthcoming renewal, we offer the following checklist for you to consider:

What should you ask your broker about your current insurer? 

• What should you ask your broker about your current insurer? 
• Are they still in the market?
• Has there been any change in their appetite?
• What rate increase are they forecasting?
• Have they indicated any new risk issues they are concerned about and/or will have additional questions on?
• Are they making any changes to the cover?
• What more information beyond which your proposal forms asks, should be presented to them, to reach the most optimum outcome?

What is your broker’s access to markets? 

• Which markets is your broker able to access?
• Is their access direct or through another broker? If your broker does not have direct access, that means that there is no direct communication between your broker and the insurer.
• Do they liaise with insurers directly or through an electronic portal?
• Do they have any exclusive arrangements and does this offer any added benefit?
• Which markets are likely to have an appetite for your firm and be a good fit for it?

Reflect on whether you are with the right broker 

• What is your broker’s involvement in the surveying and valuation sector?
• How experienced is the broker in the surveyors’ PII market?

If your broker fails to respond or cannot provide suitable answers to the above questions, then consider whether you need to engage with another broker.

If you have any questions about this article please do contact us.