Why your professional indemnity premiums are rising - and what you can do about it
Have you noticed your premiums rising? Conditions in the professional indemnity market are changing. In this article we outline what these changes are, why they have occurred and what you can do to manage them.
Why the PI market went ‘soft’
For well over a decade the UK PI market has been a ‘soft’ or buyer’s market. That means that capacity for PI cover far outweighed demand from businesses and other buyers. This ‘softening’ of the market was, in the main, due to investments in other sectors having a low yield and many outside investors seeking opportunities in the PI insurance sector.
As more and more insurers entered the PI market, competition inevitably intensified. This market expansion was good news for consumers, as insurers cut premiums and extended cover to retain existing business and win new customers.
Why premiums began rising
The changes began with a serious reappraisal of underwriting strategies by Lloyd’s of London which led to big changes among insurers - some were even excluded due to underwriting outside the agreed standards.
As the market grappled with these implications, the Grenfell Tower disaster struck in June 2017, leading many UK insurers to question their exposure to large PI claims. A number of PI insurers have, in the last year, announced that they are no longer writing PI, while the rest are restricting cover - meaning less supply within the market.
As a result of this, and for the first time since 2001, premiums are going up while cover on certain types of business – design and construction and engineers’ and architects’ lines – is contracting in terms of what is offered.
What you can do about it
The shift in the market has been significant - rates are hardening, and premium hikes are increasingly likely.
With fewer insurers offering PI a guided, consultative approach from a good broker – who will ensure premiums are kept to a minimum, and that cover is fully comprehensive – is increasingly important.
Let us help
MPW’s Professional Indemnity advisors have the experience, knowledge and contacts throughout the market to get you the right cover at a realistic price.
Contact us to discuss how to approach your PI purchase this year in light of the changes to the market.