In our last blog, we talked about the key characteristics of a “soft” vs “hard” insurance market and what triggers a hard market - read it here. In this blog, we will provide some practical tips on how businesses can better navigate themselves through the complexities of a hardening insurance PII market, and how they can achieve the best possible terms.
In recent years many construction, financial, legal, and professional service firms have been significantly affected by the hard insurance market. In turn this has created difficulties for some businesses, where they have either struggled to obtain affordable cover and / or have been forced to accept restrictions in cover.
For those businesses looking to purchase Professional Indemnity for the first time and / or are looking to review their current insurance arrangements, we have put together ‘6 Top Tips’ which could help improve your chances of securing the best terms available in the marketplace.
Tip 1. Start early
Every business is unique, and several rating factors can determine the premium a business is being quoted. Contributing factors may include:
• Fee income
• Risk profile i.e. the type of advice they offer their clients
• Contract values, client type & size
• Claims history
• Experience and qualifications
• Risk management procedures already in place
By starting the process early, it will allow your broker to work with you to prepare a comprehensive, detailed, and accurate presentation of your business for the underwriter’s consideration. Also allowing more time to explore a wider market on your behalf and providing a better chance of obtaining the most comprehensive cover at the most competitive rates.
For businesses that operate in more high risk or niche areas, starting early might mean up to four to five months in advance of your renewal date!
In addition, the terms and conditions quoted by insurers can vary. Giving yourself plenty of time will allow you to review and fully understand the different coverage available to your business, ensuring you are not just basing your decision solely on price.
Tip 2: Create the right impression
Completing the forms accurately and neatly, providing additional information through a cover letter if required and supporting your completed proposal form with copies of your terms of business, complaints register, company brochure and a CV can also really help.
If you have had previous claims, provide an additional summary of what happened, the amount of the claim and what the firm has done to prevent a similar re-occurrence.
Tip 3: Demonstrate risk management policies & procedures
If you have recently updated these documents or feel your firm has in recent months done more to reduce the chances of a claim occurring, provide further evidence of this. Underwriters get inundated with applications so to improve your chances of obtaining the best cover, make sure your firms application stands out.
Tip 4: Go through an independent insurance broker
Generally professional indemnity insurance is always best bought through a specialist broker.
Working with an independent insurance broker will allow you to carry out a fuller review of the professional indemnity market as they are not tied to any one insurer.
In addition to specialist insurers, the broker will likely have access to and built longstanding relationships with Lloyd’s syndicates and / or Lloyd’s registered insurance brokers.
An independent broker will discuss your risks with insurers, arrange suitable covers and in the event of a claim, a broker can also provide additional claims management support, helping you accurately present your claim to insurers and achieve a fair settlement.
Many brokers also link with other professional firms and can offer you preferential rates on a range of additional support services, which could help improve your business processes. This could include access to free legal contract reviews, risk management consultancies and a variety of other business support functions.
⚠️ WARNING ⚠️
The professional indemnity insurance market is a small marketplace where the number of insurers able to accommodate your business can sometimes be very limited.
Avoid sending a blanket proposal form to lots of brokers, this is rarely beneficial. This not only slows down the quoting process, but often means the same insurers see your application through multiple channels. This can reflect badly on your business and could look like you are shopping around for premiums (indicating less of a focus on cover) or if one broker was to present your business incorrectly, or with varying information to that of other brokers an underwriter may decline to provide quotes altogether.
Generally, a maximum of two brokers should be able to review the whole market for you. This approach means you are allowing each broker to carry out a full, independent, and impartial insurance review for your business and are still able to compare broker services.
Tip 5: Meet with insurers
In most cases, the broker will act as the agent of the insured, solely representing their interests in the marketplace. This means they will usually carry out all the negotiations for your business.
However, in certain circumstances, underwriters welcome the opportunity to meet with their policyholders. This will give the business an opportunity to ask the insurer any technical questions they may have. This is also an opportunity for the business to get to know their insurer, improving their understanding of the risks which are associated to your business.
Tip 6: Read and understand all terms & exclusions
For most industries, the insurer’s policy wording and exclusions vary. It is therefore important to fully understand the different options available to your business to ensure you are comfortable with the key policy terms, conditions, and exclusions of the policy.
It is also common for ‘non-standard’ exclusions to get applied to a policy. If this is the case, make sure you have given yourself plenty of time to review all your options so you understand why some quotes are more expensive than others, a broker may be able to negotiate some of these terms if there are grounds to do so.