Key points to consider when renewing your Professional Indemnity Insurance
Premiums are rising for Professional Indemnity Insurance and if your renewal is coming up in the next few months there are some important points to take into consideration.
The design and construction sector of the Professional Indemnity insurance market has been seeing consistent underwriting losses for the last few years which meant a large proportion of PI insurers willing to accept the risk of cladding contractors was already reduced before the Grenfell Tower fire tragedy in 2018 and the claims that followed.
Insurers became more selective in their acceptance of risks, whilst also restricting cover and increasing rates. Others removed themselves from the market altogether.
Following the Grenfell Tower fire, new market-wide exclusions were applied, concentrating on combustible cladding and fire safety. Consequential losses were also often excluded, with insurers only offering cover for rectification costs.
Available policy limits have generally reduced, meaning that additional insurers are required to write the policy in a different way. This can bring additional restrictions, as each insurer will have parameters within which they can write business. Where previously policies were often written to provide a maximum limit on any one claim, most insurers will now only offer aggregate limits.
During this time period, premiums have risen sharply with rates in some cases increasing by up to 500%. Required excesses have also increased, with cover simply not available in a structure commonplace a few years prior.
Be proactive about renewals
Whilst some outcomes are unavoidable, they can be mitigated by proper risk and market management. Your insurance brokers should be guiding you through the renewal process, and as a minimum discussing the following important points with you:
- Time – More than ever, you need to ensure that good time is allowed to gather the required detail and negotiate with insurers. The renewal process should begin as a minimum three months prior to renewal, sooner if possible.
- Tripartite relationships – It is important that your insurer has a direct relationship with you, as well as your broker. They need to understand your business, and the best way to do this is to speak with you directly.
- Risk management – It is not only important that you manage your risk correctly, but also vital that you can demonstrate this to insurers. Take the opportunity to discuss this with underwriters and present your business to them to ensure they understand the measures and procedures in place.
- Deductibles - Consider strongly what level of retained risk you can afford. This remains a key element in bringing insurers to the negotiating table.