COMMUNICATION HAS NEVER BEEN SO IMPORTANT

While artificial intelligence may be taking over the world, in professional indemnity insurance, good old-fashioned person-to-person conversations are more important than ever.

By MARTIN WANLESS

Even taking construction out of the equation altogether, professional indemnity insurance has been a fractious area for a while now, with challenging occupations and industries continuing to be hard to place for brokers, with uncertain capacity and economic challenges creating uncertainty.

“The severe ups and downs of the economy are putting everyone under pressure,” says Wade Cadman, Underwriting Manager – Professional Risks at Brooklyn.

“This is changing underwriting approaches to a number of industries as we need to keep in mind how the industry will weather the storm.”

While Cadman says the re-entrance of Lloyd’s is now smoothing out some of the big bumps in the market, capacity has been tight – meaning brokers need to work with multiple insurers to place a risk – which in turn, causes issues.

“The shrinking capacity of insurers means there has been a greater need for excess layers at a much smaller level than ever before,” says Ange O’Neil, GM of Broking at Resilium Insurance Broking.

“This increases premiums, and what was considered to be SME businesses are now having similar conversations and premiums to what was considered to be midmarket in the past. Explaining to a small business why they need two insurers can often be confusing for a client.”

Such deals often rely on person-toperson discussion. However, in an era of artificial intelligence and automation, that can be increasingly challenging to come by.

Getting The Communication Balance Right

Insurance has, of course, always been very much a relationship-based profession, but in today’s world, it can sometimes be easier to default to what the algorithms determine – particularly where di cult-to-place risks are concerned.

“The main challenge over the last six months in the professional indemnity market has been the lack of importance insurers place on resourcing their underwriting units appropriately and the increased reliance on online systems, says Christian Garling, Managing Director of FTA Insurance.

“The lack of experienced underwriters often leads to a ‘computer says no’ response from insurers and ine cient internal processes mean insurers are taking a week or longer to turn quotes around and brokers are often getting renewal quotes a day or two before expiry.

“You can’t negotiate with an online system as you can with an underwriter. It is the negotiation on behalf of clients where brokers really add value. If the broker is merely getting an online quote, then clients can do this themselves.”

As a consequence, there’s a thirst and desire for robust communication.

“Communication is key,” says Anita Lane, Director at Solution Underwriting.

“Underwriters need to communicate e ectively with brokers at each stage of the renewal process to ensure that all stakeholders are aware of how an insurer plans to manage challenging occupations.

“If insurers are considering restricting coverage, increasing excesses, adding endorsements, or reducing capacity lines, they need to communicate this to their brokers with enough time for brokers to discuss these changes to their clients and to reconsider their marketing of the risk.”

Of course, when sta ng shortages are a reality of business – as they currently are –this causes problems of its own.

“I don’t think I have spoken to anyone in the insurance industry over the last 12 months who has not commented on sta ng challenges,” says Cadman.

“Sta movement, and skills shortage have put a huge burden on the industry. With all the sta movement, relationships, and ‘ambient’ company knowledge is lost. Larger companies can shoulder and redistribute the workload, but smaller enterprises are doing it tough.

“We are needing to change the approach we take in hiring sta . Companies are having to pivot slightly to ensure that sta needs are being met and establish a strong training and mentoring plan.

“While it requires some investment, it will pay o in spades as we will have a far more skilled and engaged workforce, and can develop individuals to continue to grow. I think the industry as a whole needs to do a better job of putting insurance careers up in lights and promoting the opportunities within universities.”

The Importance Of Relationships

The argument for people investment is absolutely valid, because relationships between broker, client, underwriter and insurer are critically important, and Garling says the profession needs to focus on what clients want.

“Clients want consistency, transparency, flexibility and prompt service,” he says. “The challenge is providing these.”

Professional Indemnity Tips For Brokers

Anita Lane, Director, Solution Underwriting has the following tips for brokers working with PI clients.

1. Explain to clients the importance of returning completed proposal forms in a timely manner. Limited capacity means that placement can now include one or two excess layers which inevitably slows the process.

2. Fully understand your client’s professional services before you go to market.

3. Ensure the submission truly reflects the professional exposure of your clients. The worst submissions are those that are simply an email from a broker with a client’s website, and no other underwriting information (and trust me, they exist!).

4. While websites are an effective tool, a risk cannot be written based purely on a client’s website. Sometimes they are detrimental to the risk, highlighting activities the client thought they might do but never got into – a website, after all, is a marketing tool, so many have some level of embellishment.

5. Understanding the client’s PI exposure is essential to creating a PI submission for underwriters to consider. Give underwriters as much information as you can to ensure they make informed decisions.

6. Follow up your submissions with a phone call or, even better, a face-to-face meeting, to discuss the client and the risk. If you can make underwriters feel comfortable, you’re guaranteed a better outcome for your client.

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Of course, the professional indemnity sector is changing, with new ways of working, meaning there are often more layers to reveal before truly understanding the risk.

O’Neil says ‘consultants’, while not new by any stretch of the imagination, continue to be challenging given the shifting nature of their potential role and the sectors they’re working in – particularly post-pandemic and with work often spanning globally.

Again, communication is critically important to understand the extent of a client’s business.

O’Neil says, “With businesses now expanding into very di erent styles of incomeearning business, many clients do not fit into one occupation code, and so verbal discussion with clients is more important than ever.

“Emails can be glossed over, websites out of date, but a client will usually be more than happy to discuss which direction they are taking their business and how they intend on growing.”

Emerging On The Horizon

In terms of emerging risks, Cadman identifies ‘recurring issues in industries that have no PI exposure (cleaners, trades-based risks), research and development risks that are in alternate areas, renewable energy risks, crypto, fintech, and blockchain, while Garling says the provision of online services is something that presents new risks and challenges – and, again, is an area brokers should delve into.

“These services are particularly vulnerable to cyber attack either by holding the insured to ransom or using the insured’s IT systems to access the IT systems of the insured’s clients,” he says.

“The professional indemnity market excludes cyber risk and brokers need to ensure they have o ered their clients a standalone cyber policy. Brokers should be very wary of providing cover via Cyber Endorsements, nor should they rely on combined policies to cover all exposures. Having two policies is always the best option as often there will be crossover between the two, which maximises cover for the insured.”

All of which simply serves to illustrate once more that, when you’re writing professional indemnity, it’s certainly good to talk.

Pi Claim Successfully Defended

A real estate agent was the subject of a claim when a tenant sustained an injury when stepping on an unsecured brick while crossing the driveway of his rental property, which the agent was managing.

The claimant alleged the insured was negligent in failing to maintain the driveway in reasonable repair, and no action was taken when he reported the defects on multiple occasions.

Once the claim was notified to Brooklyn via the broker, it was quickly identified the insured had acted appropriately by identifying the defects, reporting defects to the owners at regular intervals prior to the incident via routine condition reports; recommending the owners obtain a property/safe risk assessment report; replaying previous tenants’ complaints to the owners; and taking steps to arrange quotes for the repair of the driveway prior to the incident.

Brooklyn, via its panel lawyers, issued a notice denying the claim and issued a Contribution Notice to the owners, claiming indemnity/contribution from them, which was denied.

The claim progressed to a compulsory conference, where eventually, the claim was settled between the claimant and the owner, with no contribution from the insured.