Professional Indemnity Insurance (PII) is essential for protecting you against the cost of legal actions for negligence. However, PII is becoming an increasingly higher cost for businesses.
Why is PII so costly?
Over the past few years, the insurance industry has suffered huge losses due to the Grenfell tragedy and as a result of FCA investigations, plus the number of claims in general have been increasing. This has led to a reduction in the number of insurers willing to underwrite this type of risk which in turn has led to a hike in PII premiums, particularly in the financial sector.
Therefore, it is important you shop around and obtain at least one comparative quote. An insurance broker that specialises in the consultancy market is Hiscox, who can provide tailored policies suited to the needs of different consultants. However, there are many online companies that can provide you with a quote. If your business is considered one with a higher risk profile, you may wish to use an advisory broker who will search with different insurers to get you the best deal. This type of broker will also guide you how best to present your submission and help you choose the company that best suits your needs.
Recently renewals have been taking considerably longer than usual, possibly due to a change in working conditions during the pandemic, increased scrutiny of the cover and risk, or a reduced number of providers. Therefore, try to make any renewal requests at least 4 weeks ahead or as early as possible to ensure cover is continuous.
Thinking of branching out?
Given current market conditions, you may be considering diversifying or switching to a new line of work. If so, check with your insurer whether this is likely to increase your premiums prior to undertaking this work. Some areas are viewed as being much riskier than others and could cause a substantial increase in your premiums. Examples include offshore tax, trust work, tax mitigation schemes, investment advice, insolvency, valuations, mergers & acquisitions, or work for high net worth individuals or famous clients.
Made a claim in the previous year?
Previous claims may make it more difficult to obtain an immediate renewal of your policy. It is possible you will be required to demonstrate what has been done to rectify any problems and what measures have been taken to minimise the risk of the issue happening again.
Questions relating to Covid-19?
Some insurers are asking additional questions relating to working arrangements during the pandemic and some are excluding cover for Covid-19 risks. Be prepared for questions such as does your company have a Business Continuity Plan or do you expect a significant fall in turnover.
Do you need run off cover?
Run-off is cover for claims made after a business has stopped trading, relating to work carried out prior to cessation. You can be sued up to six years after an event and therefore you may wish to consider run-off insurance for a year or so after you cease trading, or until you think the likelihood of a claim being made is minimal.
The risk of a claim in the first year after ceasing work is generally deemed just as high as when working. However, if you stop working for any reason, contact your insurer as they may be prepared to offer you a discount, and premiums usually reduce the more time goes by.