Broking boss weighs in on market’s professional indemnity woes

Broking boss weighs in on market’s professional indemnity woes | Insurance Business

Broking boss weighs in on market’s professional indemnity woes

Mackay-based Gardian Insurance Brokers, which operated remotely for about six weeks during the first wave of the coronavirus outbreak, is doing its best to assist customers amid a troubled professional indemnity insurance market. 

“As a broker, I think at the moment, from a commercial aspect, the biggest challenges are the premium increases and the limitation of professional indemnity underwriters to write certain risks,” managing director Luke Phillips (pictured) told Insurance Business.

Part of insurance broker network Steadfast Group, Gardian has close ties to the mining and resource sector – an industry that, according to Phillips, is having to contend with very high limits for professional indemnity. The MD called it “extremely difficult” to find capacity beyond $10 million.

He noted: “You got to go outside the market and get excess layers for that, which is basically another insurance policy on top of the primary policy which can be quite high.”

When asked what he thinks the culprit is, Phillips pointed to the other side of the planet.

“I think basically it’s got a lot to do with the professional indemnity insurance market in London,” he asserted. “They’ve had, obviously, some big losses and they’ve basically just overhauled their policy on it. And there’s now a limited number of insurers that actually are providing insurance for a particular industry, such as the engineering space or civil design and construction space.”

The broking boss added that, aside from the capacity issue, coverage itself is becoming limited as well. Now this is where the value of Steadfast’s contractual liability review service comes in, and Gardian is making sure it takes advantage of the free benefit.  

Phillips explained: “What we do with our clients is we try to get an in-depth knowledge of their contractual requirements, first and foremost, and we use our resources at Steadfast who have numerous legal resources through Meridian Lawyers. So Steadfast engaged them to do contract reviews on behalf of Steadfast brokers.

“So we engage them, we give them what our clients’ policies cover and give them a copy of the contract – make sure that there are no gaps in coverage. And if there is, then we’ll identify them and negotiate draft changes to the contract so the current insurance meets the requirements of the amended contract.”

If the draft changes aren’t agreed to, Gardian secures excess coverage to ensure that clients meet their contractual indemnities. While stressing the importance of obtaining legal advice, the managing director said brokers should be making their clients well aware that they shouldn’t be signing contracts without them being reviewed.

“If the insurer hasn’t agreed to some of those indemnities and they’re outside the scope of their insurance, then they’re going to have a gap in their coverages,” he declared.

“I think for those brokers out there that aren’t providing that particular due diligence and that advice, the ramification of that is they’re going to have clients that are underinsured and potentially put their own professional indemnity insurance at risk as well.”