The professional indemnity insurance market for property and construction consultants is currently comparatively untroubled by claims, even for the traditionally higher risk professions such as valuers.
Insurance capacity is plentiful and competition amongst insurers is fierce. This has resulted in many firms receiving premium reductions at renewal over the last 3 years, even where fee income has risen.
Long may it continue…… but firms are advised to take note of the prevailing economic uncertainty and the longer term impact this could have on PI insurance rates. Insurer margins are very tight with a number of insurers reporting poor financial results and some insurers starting to hold, or at worst, increase PI rates at renewal.
Post Grenfell, businesses with any form of involvement in cladding should at best expect additional questions from insurers at renewal. For firms which have either specified or installed cladding, PI insurance may become increasingly hard to secure, more restrictive in terms of the cover provided and more expensive. Firms in this category should ensure they start the renewal process early and they must maintain a regular dialogue with their insurance broker.
For firms undertaking valuations for lending, it is important to be wary of those lenders that have reverted to post recession behaviour. Higher risk products appear to be firmly back on offer whilst property prices in some areas of the UK remain depressed and earnings, adjusted for inflation, fall. High risk lending has its place providing the risk is well managed but if there’s a meaningful increase in repossessions, some insurers may respond with a knee jerk reaction defined by either a withdrawal from the market or a sharp hike in premiums.
Firms providing condition reports to consumers should also be aware of a steady increase in complaints and a change in the way these complaints might arise, for example via social media. Whilst these matters rarely trouble insurers with the average settlement at around £2,500, few small firms can bear more than two or three settlements a year when margins are under continued pressure.
In these uncertain times, businesses should ensure that their insurance programme is as robust as possible. How can you achieve this?
- For larger firms, a primary layer of insurance shared by several insurers, rather than one;
- Ensure you have a good quality lead insurer, preferably one that stood by surveying firms between 2009 and 2014;
- Appoint a specialist professional indemnity broker who understands the surveying sector and has the expertise and resources to guide your business through a claim;
- Consider the longer term implications of changing insurer for a small cost saving. It’s important to note that a change of broker does not always require a change of insurer.
For advice on any aspect of your insurance or risk management arrangements, please contact Emma Vigus or Greg Harrison on 020 7133 1570, firstname.lastname@example.org.