The professional indemnity insurance (PII) market has seen significant rate increases in recent renewal seasons, driven by a number of insurers exiting the market and others focusing on correcting their books of business instead of actively pursuing new business opportunities.
The underwriting environment has now started to stabilise with rate increases slowing as insurers are getting closer to what they perceive as “price adequacy”. Nevertheless, many businesses may want to keep their insurance expenses at bay in the current challenging economic environment. Below are a few helpful tips that can help accountancy firms better control their insurance costs.
Recommendations:
- Start renewal early, particularly if the business has filed a claim recently or performs work insurers may perceive as higher risk. This should allow your broker to approach underwriters with a convincing presentation and shows the underwriter the importance the business places on insurance. There are peak times for renewals and insurers can be more selective if they are busy.
- Review policy wordings to identify any overlaps or gaps between cyber, directors' and officers' liability (D&O) and PI policies. Overlaps can add complications when claims arise. Gaps in insurance can severely impact the finances of a business in case of a loss.
- Present renewal information in a clear and transparent manner. Your insurance broker should ensure that the business is presented in the most effective way to underwriters.
- Pre-empt insurers' questions and concerns. Your broker should help you second guess any extra information an insurer may require. Supplying the information upfront helps to shorten the quotation process and to maintain insurers' interest.
- Provide any mitigating information - if the business is likely to be viewed as high risk, identify steps that can be taken to reduce and manage the risk such as through Continuing Professional Development (CPD), staff training, cyber awareness, or limited liability clauses.
- Pay the premium in one amount as most monthly payment options will be via a credit facility with interest charges.
- Consider raising the business' excess if you perceive your firm as a low risk and/or the business could afford the cost of a potential loss as it may result in lower premium.
- Avoid policy lapses and late renewals as insurers will see this as an indication of lack of planning and perhaps professionalism. Last minute renewals create pressure and rarely produce the best outcome. If you are likely to be late renewing, inform your broker as soon as possible. Letting the cover lapse and then asking for a policy to be backdated is not good practice.
- Carefully consider the level of cover the business needs – could the work result in multiple claims arising from a single cause? If so, insurers will typically treat all claims received as one. Could your policy limit cope with this? Higher levels of cover may be negotiable.