Professional indemnity (PI Insurance) offers protection against losses that result from legal action due to a negligent act, error or omission. This type of insurance can also cover concerns such as slander, libel and breach of contract.
PI insurance cover is critical for organisations that provide professional advice, offer recommendations, design solutions or represent others.
It is important that you realise that the UK’s hardening PI market has made it increasingly difficult for organisations to secure adequate levels of cover.
Recent disasters such as the Grenfell tragedy and the collapse of Carillion have generated unfavourable PI market conditions across the UK.
This market shift has even resulted in some insurers leaving the PI industry altogether.
Review the following guidance for an outline of how the hardening market affects PI insurance and top tips for securing adequate levels of cover during this market change.
How the Hardening Market Affects PI Insurance
A hard insurance market is characterised by high demand and a lower supply. Over the past few years, various large-scale catastrophes throughout the UK have caused a significant increase in PI claims.
This surge in demand for PI insurance has resulted in a major market fluctuation, leaving insurers to pay the hefty price tag of additional claims. Consequently, the PI market has lost half a dozen insurers in the past year.
As a result the insurers that have remained in the PI market have implemented a variety of measures to limit their exposures and reduce their risk. These measures include:
- Extra information—Prior to renewal time, insurers have begun requiring more detailed information from organisations regarding their business operations.
- Higher premiums—In order to compensate lost profits from a growing number of claims, many insurers have increased their premiums.
- Cover restrictions—Many insurers have implemented restrictions upon policy renewals, such as limiting cover to a single aggregate amount or imposing a higher self-insured excess.
Securing PI Cover in a Hardening Market
Despite the tough implications of the hardening PI market, you can help your organisation maintain adequate cover by:
- Communicating with your broker—Make sure you speak to us to discuss what level of cover and unique policy features your organisation needs. Ensuring frequent communication with your us will help you stay informed, supported and—most importantly—covered during these market conditions.
- Start the renewal process early—In a hard market, you can’t wait until the last minute to secure quality cover. With this in mind, be sure to engage in your PI policy renewal process as early as possible.
- Invest in risk management—Now more than ever, it’s vital to invest in risk management processes and provide documentation of these practices to your insurer upon renewal time.
Contact Edison Ives today for more guidance and PI insurance solutions.