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Professional indemnity insurance: Hope for the best but don’t forget to plan for the worst

This blog from Griffiths & Armour briefly details the pitfalls related to professional indemnity (PI) insurance and how they can be resolved.

Perhaps it’s just part of the human condition that we hope for the best but don’t always plan for the worst. On many levels, that optimistic outlook is to be admired but when it comes to the PI insurance market it is often misplaced and potentially dangerous.

Over the past number of years, we’ve looked to explain what’s happening within the PI insurance market through a series of client communications and broader industry engagement. In the past 12 months alone, we’ve delivered:

  • Our detailed Client Information Alert
  • Guidance notes for professional bodies
  • A video summarising how firms should be approaching their renewal
  • A number of industry webinars

These initiatives, together with industry reports, surveys and publications, have helped raise awareness of market conditions. Yet we continue to receive last minute enquiries from firms who are struggling to source renewal terms or facing into severe restrictions in cover; and the message is invariably the same:

“We knew the PI Insurance market was in distress but we didn’t think it would impact on us”

This overly optimistic view, that it must be somebody else’s problem, is often predicated on the firm’s perception of their own risk or the experience they had at their last renewal:

“We are a great risk; we’ve never had a claim”

“Renewal has always been reasonably straightforward, and we’ve been with the same insurer for years”

“Nothing has changed in our business.  We’re still doing what we’ve always done”

What these comments fail to recognise is the fundamental shift that has taken place in the PI insurance market. Firms can find themselves in distress for a whole variety of reasons:

  • There doesn’t need to be a significant claim
  • They don’t need to have exposure in particular sectors
  • They are often firms who have never encountered difficulties before

They are often firms who look just like you.

In a PI insurance market where capacity is severely restricted, you could find yourselves competing to have insurers take on your risk. We all want to be optimistic, we hope to achieve better outcomes. As brokers we have a responsibility to do what we can to achieve that, but we need your help.  

Regardless of who your broker is or how you regard your risk:

  • Start the renewal process early
  • Engage positively
  • Respond to questions fully
  • Make sure insurers understand your business

Over the past two years, we have come to the assistance of many firms but time has been critical in achieving better results - and at times the clock has simply run out. Remaining optimistic is to be admired, it’s an essential trait in the current climate. What we can’t do is let it become a substitute for the affirmative actions that will be required to achieve the outcomes we hope for.

Graeme Tinney
Professional Risks Director
Griffiths & Armour Professional Risks

Griffiths & Armour are specialist Professional Indemnity Insurance Brokers and risk management advisers. authorised and regulated by the Financial Conduct Authority.  For further advice on your own PI arrangements or to discuss any difficulties you may have encountered, members should contact Graeme Tinney at: [email protected]


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