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The professional indemnity market has faced a host of challenges recently, but there are some indications that its capacity and coverage issues might be turning a corner.
At the leading edge of PI’s hard market is D&O, which has been clobbered by class actions in recent years. Insurance Business had reported D&O premiums skyrocketing by 300%. However, according to some experts, including the latest quarterly report by Honan Insurance Group, new capacity has started entering the D&O market. Existing players are also increasing their appetite for a wider range of risks.
“FTA has continued to target known low loss ratio areas and provide excellent results to its
long-term capacity providers”
Christian Garling, FTA Insurance
That’s good news for brokers, insurers and their customers. PI is an essential insurance for companies that provide advice or services. It’s also becoming critical for a range of other occupations, from copywriters to building contractors.
If a PI-related liability issue crops up, the cost of being uninsured or underinsured can be crippling in the event of a claim. It might even put a company out of business.
Despite the hard market conditions, brokers found lots of positives in the performance of the top underwriters and insurers. Brokers measured PI achievements according to coverage and service level across a range of insurance offerings and products. The leading performers achieved high marks for underwriting expertise and claims handling. They also scored well on criteria such as general policy coverage, and specific insurance areas like civil liability claims and breach of confidentiality.
The ratings received by the 2022 5-Star Professional Indemnity winners point to greater optimism in the sector, as some of the winners confirm.
“The secret is pretty simple, yet seemingly hard to replicate. Answer the phone, respond to emails and call people back”
Tony Wheatley, Berkley Insurance Australia
In IB’s reports on professional indemnity insurance, brokers often cite a broad range of criteria as very important. This year’s survey is no different. On average, brokers marked no less than 12 coverages and service areas with four points or more. The scoring range is five points for "most important" and one point for "least important".
Both underwriting expertise and breach of duty services ranked highest in importance to brokers with average scores almost hitting the maximum of five.
Civil liabilities claims, breach of confidentiality, and claims payment and processing were three coverage areas and services that ranked with averages above four and a half points. Interestingly, with all the industry talk about the importance of risk mitigation, access to risk mitigation in PI services ranked lowest, but was still above three points.
IB also asked the service and coverage question in a slightly different way. Brokers were asked what they saw as the most important consideration when choosing a PI policy. Cover and benefits were often mentioned, especially the actual scope of the cover. Another important factor was the presence of accessible and knowledgeable underwriters.
When it comes to particular policies, many of the brokers said they offered clients general PI policies. On a ranking scale from “poor” to “excellent,” the brokers scored these policies highly on performance. The majority of these general PI policies achieved scores of four.
Some of the more specialist PI insurance policies received lower scores, but the better performing insurers and underwriting companies rarely dropped below three points. For example, PI policies targeted to cover design and construction liability recorded scores of three.
“Our aim is to maintain rate increases at modest levels to ensure we allow for increasing costs and provide a level of certainty to our customers”
Tony Wheatley, Berkley Insurance Australia
There were familiar faces among the top performing insurance companies. For two years running, brokers have chosen FTA Insurance as a winner in IB’s 5-Star Awards for PI insurers.
“Each year that FTA continues to receive the 5- Star award confirms that its broking partners value the products and expert advice they receive from FTA,” says Christian Garling, the company’s founder and managing director.
FTA did well in the particularly tough D&O area, especially for its E&O lawyers and E&O not-for-profit offerings. Garling partly put this down to targeting well-run private companies and through these customers already purchasing FTA’s PI indemnity offering, establishing a deeper relationship with the client and more knowledge of their business.
“This has in turn lead to FTA and its brokers being able to provide a better offering to its brokers and their clients,” he says.
The survey’s indication that brokers have a high regard for FTA’s underwriting expertise and claims processing could be a result of the firm’s deployment of some new technology in the PI space.
“FTA recently released its online platform for professional indemnity. Brokers have found the user experience to be very easy and, in particular, they like the ability to use the insured’s own business description rather than be forced to use the pre-existing descriptions,” he says.
Another reason for FTA’s impressive performance could be how the company has successfully coped with the challenges of the hard market.
“FTA has continued to target known low loss ratio areas and provided excellent results to its long-term capacity providers. Thus, FTA, its brokers and their clients continue to benefit from premiums that are more competitive than others are able to offer,” says Garling.
Another insurance company that brokers credit with managing the hard market successfully is Berkley Insurance Australia (BIA).
“At BIA, we have had a growing portfolio of SME PI for many years, and whilst we have had our challenges, we have not needed to react to a frequency of large claims,” says CEO Tony Wheatley.
BIA has been able to deal with those PI challenges and keep rates at reasonable levels.
“Our aim is to maintain rate increases at modest levels to ensure we allow for increasing costs and provide a level of certainty to our customers,” he adds.
Wheatley says PI is a core part of BIA’s business and technology is a focus of the company’s offerings.
“BIA needs to provide systems and processes that 100% support the objective. Single point-of-entry IT systems, delegated authority, simplified referral processes, and one-touch document production are all must-haves to provide underwriters the ability to turn things around quickly,” he says.
BIA achieved top scores of four and five for its policy in the challenging design and construction space across SMEs’ D&O and E&O for medical, construction and multinationals.
One explanation for BIA’s broker accolades for service and coverage is its reputation for responsiveness.
“The secret is pretty simple, yet seemingly hard to replicate,” says Wheatley.
“Answer the phone, respond to emails and call people back. The underlying principle being to deal with people the way you yourself would want to be dealt with,” he says.
Insurance Business surveyed brokers across Australia to acquire a thorough understanding of what insurance professionals thought of current market offerings and select the best professional indemnity insurers for 2022. Brokers were quizzed on what features they thought were most important in a professional indemnity policy, and then asked how the companies they had dealt with rated those attributes. The winners were measured on their ability to handle claims, their underwriting expertise and, most importantly, the strength of the individual products they provide.
76% of respondents rated claims payment and processing as very or most important when choosing a PI insurer
79% of respondents rated coverage for breach of duty as very or most important when choosing a PI insurer
83% of respondents rated coverage for legal costs as very or most important when choosing a PI insurer