The consequences of the softening UK PII market
In this episode, #IBTalk dives into how the PII market has evolved throughout the pandemic and key trends currently buffeting the sector, focusing on the difficulties brokers faced, the solutions available to brokers, and how underwriters are looking at risks differently.
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Welcome to IB Talk, the leading podcast of the insurance industry across the UK and Ireland.
This episode is presented in partnership with MGB Insurance Brokers.
As the return to the workplace progresses, what is the current state of the professional indemnity insurance market and what key trends are emerging for the sector?
To discuss this and more, we are joined by Nick Bender, Joint Managing Director at MGB Insurance Brokers and Pat Boreham, Head of Broker Development.
Mia: [00:00:54] Hello and welcome to the latest edition of IB Talk, the Insurance Industry podcast brought to you by Insurance Business. My name is Mia Wallace, Senior News Editor at Insurance Business UK and today, we’re going to be discussing the ever-evolving professional indemnity insurance or PII sector.
Joining me for this discussion are Nick Bender, Joint Managing Director of MGB Insurance Brokers and Pat Boreham, Head of Broker Development of MGB Insurance Brokers. Many thanks for being here today.
Nick: [00:01:24] It’s my pleasure.
Pat: [00:01:27] Afternoon.
Mia: [00:01:28] And just to start us off, I was wondering, I might call on you both to tell me a little bit about the roles you hold at MGB and the work that you do in the PII space, maybe starting with you there, Nick.
Nick: [00:01:30] Yeah. Well, the role is very varied. We're not -- MGB is not the archetype or sort of corporate, Lloyd’s broker where the board of directors just direct. We're very much involved in the day-to-day running of the business, from looking after existing customers through to claims management.
So, I think I'll be on the on here for a good five or 10 minutes explaining what I do, but you know, Pat and I lead MGB from all corners of the business.
Pat: [00:02:18] Yes, I've been -- I know, Nick has been in the market longer than me but I've probably been in the PR market. I’m right around about 30 years now. And throughout that time, I've gained experience across all of the professions and works either on a direct basis or in the case, which really benefits me in the role here at MGB, on a wholesale basis.
And my role is very much operating as the communication points for all of our brokers throughout the UK, helping them understand and appreciate how we can support them as a team, bringing them up to speed, what's going on in the market, which is obviously what we're gonna touch on today. And as well as speaking with our brokers on the phone, on Teams from the face of -- on screens nowadays.
I'm also thankfully getting out and about seeing our brokers on a face-to face-basis, and so it's very much a communication role, making sure that we are providing every support we can to help our brokers.
Mia: [00:03:25] Lovely. And it strikes me that you both have a real wealth of experience in the PII space. And given the positions that you hold at MGB, I can see that you would have a very strong aerial view of what's happening in the markets. And I wondered, could you outline some of the key trends that you're seeing buffeting the sector at the moment? Maybe starting with you there, Nick?
Nick: [00:03:41] Yes. Well, I think we've -- I think the markets been buffered for the last two and a half years. We are now seeing -- I'm pleased to see this and in fact, I'm more than pleased. We're seeing an easing of underwriting rates. Not many people will agree with me. It is not across the board, I accept that, but we are seeing the easing of rates. And that's can only be good for the UK professional and the firms that require professional indemnity insurance.
Other sectors that we handle, such as directors and officers and cyber and medical malpractice, that they're not seeing the easing of rates at the moment. But every cycle changes, and, you know, we're looking at how things go at every quarter. But I think that the PR market has gone through that its worse period for decades. And obviously, COVID-19 and the various lockdowns we've had hasn't helped at all. In fact, it's hindered our roles.
I mean, we have been doing -- we have been trading in the Lloyds market since 1688, when the London Gazette first made reference to Edward Lloyd's Coffee House in Tower Street. And so it's quite apt that, you know, the market is getting back to normal or trying to get back to normal. And in those days in 1688, there were 80 coffee shops in the city of London. So it's quite an app that we're -- we go back to see underwriters at places like Caffe Nero. So, you know, I think the worst is behind us, the market is not contracting anymore but I'm sure that Pat will agree with me.
Pat: [00:05:36] Yeah, I agree entirely with what you're saying there, Nick. It's probably worth adding to that as well by making mention that there's probably 20000-25,000 brokers throughout the whole of the UK but only a very small number of those brokers solely specialize in -- or focus on PII.
So, from our perspective, the vast majority of all the brokers that we work with, PII is only a small part of what they do. So, with what Nick just said there where we are beginning to see flickers of light at the end of the tunnel with it and easing in the market on rates and on cover and I know it's going to occur in different timing with different professions.
But from my perspective and the whole team here, it's important that we communicate this to our brokers throughout the UK bearing in mind as I mentioned earlier, PII is only a generally speaking a small part of what they do. So, if we could just keep them up to speed with how things are beginning to develop and change for certain professions all the better as far as we are concerned.
Mia: [00:06:50] Fascinating perspective there, Pat. And from my perspective, an interesting thing about the PII market is that making predictions can often seem a little bit doomed to failure. I know when COVID first emerged, there was a lot of concern in the market regarding the potential litigation of brokers relating to business interruption claims. How has this unfolded so far? Is there still the potential for further fallouts? Maybe a starting with you there, Nick?
Nick: [00:07:18] Well, yeah. So I think in March 2020, we were all very confused as to what the future months, years were gonna hold for us. You know, there are many areas, I mean, many market commentators were concerned about the equity market collapsing. And so with that, the COVID situation extended into various areas within the PII market.
But to answer your question, insurance brokers, well, I never really -- I didn't want to sound like a being the wise guy but I didn't foresee many issues for insurance brokers in terms of claims arising out of negligence or alleged negligence from business interruption claims and the situation has proven to be correct. We look after the PII programs for approximately 200 insurance brokers, independent insurance brokers around the United Kingdom, I can tell you that we've had less than not the fingers on one hand in terms of allegations of wrongdoing by those insurance brokers.
I mean, the Supreme Court ruling that brought in a number of insurers certainly helped. And as some insurance brokers over the last two years had bought their PII cover without COVID-19 and continue to trade, I think the vast majority of our clients did by COVID-19 cover. And it takes me back a little bit back a few decades when we were all concerned about the year 2000 and what the effects would be to go into a new millennium. And that, again, didn't cause insurance brokers or the UK PII market any problems.
And then we have the issue of the year 2001 because the IT sectors are all – the IT machines can't recognize the digit one after the year 2000. So, there was further sort of hardening and crazy year for the insurance for the year 2001.
So, I think, all in all, nearly two years later, we've not seen more than a handful of grumbles in ones that come against insurance brokers and the vast majority of insurers have done the right thing by settling those business interruption claims.
Pat: [00:09:57] Mia, just to add to that, actually, it's also probably worth saying and Nick touched on it already that when we first faced the concerns over COVID-19 in March of 2020, understandably, brokers became extremely worried about potential business interruption claims. And what it prompted all of them to do -- I'm sure that all of them, I can say to do was to review their customer book and make their clients aware as when their policies came up for renewal.
That was two years ago now, just under two years ago now. So, we moved towards the point now where those brokers throughout the United Kingdom have renewed pretty much all of their policies and presumably made their clients aware of what they're covered for moving forward. So, it's less of a concern now, I suspect, but quite rightly so, brokers are needing to adhere to the minimum requirements of the FCA with regards to that element of cover for themselves.
Nick: [00:11:03] Yeah, if I may add to that, add in one little thing here, one little point is, I think that there's agreater exposure to insurance brokers where their employees work from home greater than the COVID threat and it's interlinked with it, I suppose in a way. For the oversight and control of ensuring that employees are being trained properly, they are able to respond to clients’ needs, they're getting policies insured -- risks insured rather, all these things doing it virtually has been a real struggle, I think for our industry.
And so, you know, we encourage the return to the office where we can be creative with each other, and ensure that the working day is overseen by a whole team of people rather than just sitting at home, or in a flat, or wherever with a laptop and not being given the proper guidance. Certainly, for the generations below, half of myself.
Pat: [00:12:13] And just to add to that, Nick -- and I know I'm showing my age here now, but I can remember the days when the open market for PII first began for solicitors back in 2000s. And insurers quite rightly were wanting to see as much information about individual practices as they could before they decided to offer terms or not. And there were many a time I can remember back in the day where you'd see a two partner firm of solicitors with six offices. And one of the key questions that underwriters would ask back then was, “You have two partners, you've got six offices, how are you managing those offices and keeping in touch with the relevant staff in those offices?”
And to a certain degree, I can see the comparison with what you're saying that, Nick. People working from home, we understand the reasons for that but as things hopefully start to ease and get better for all of us, the sooner people are working together as their usual teams, the better it is in terms of managing them and spotting issues and concerns as well as spotting good things that are going on as well that they can assist with. So, it's something that both Nick and I are fully in agreement on.
Mia: [00:13:31] No, it's fascinating. You both mentioned that concern regarding the return to the workplace because it's certainly on everybody's minds at the moment. And are you seeing that knowledge of that exposure being reflected in the conversations that you're having across the market?
Pat: [00:13:42] I'll probably answer first on that one, Mia, if you don't mind. In terms of issues with regard to potential notifications against brokers themselves, no, not as yet. I haven't -- I'm not aware of anyone having any issues in that regard.
But what I am saying, bearing in mind that the role that I have involves getting out and about and seeing the owners and senior people and others as well, for that matter, in brokers across the whole of the UK, the feedback I'm generally getting is they do certainly see the benefits of the teams, the individuals within their companies coming back together working within one office.
And it comes back to one key thing in my mind which is not just about potential exposure to brokers, PIIs themselves, but in terms of how they manage their own clients. It's about communication. If you're in the same office, you're able to deal with things sooner rather than later, you're able to raise concerns or raise issues about certain things far quicker.
So, the general feedback I'm hearing from brokers around the UK is it's a good thing that will begin to gradually come back together working in the offices.
Mia: [00:15:08] And as things start to settle a little bit post-COVID -- if we can call it post-COVID looking back, how well do you think the market fared when there were no face-to-face meetings possible? And what do you think the market would do differently if it was faced with the same concern again? Maybe starting with you there, Nick?
Nick: [00:15:22] Well, that's a very good question. And with the benefit of hindsight of the last two years, I keep the answer sort of, to the point, I think, none of us were prepared for the lockdown in March 2020. And so, I think -- answering on behalf of the market, I think the market did very well.
However -- and there is a, however. If I go into Lloyds and see -- I go into Lloyds to go broking, I can see the underwriters sitting at their boxes. So everything is very clear. And you know, the old days of going out of the market in the morning in the afternoon and doing a full day's work.
That ability was blunted in March 2020 for the months that we were locked down. But I think overall, the market has adapted. I think that whilst that might be seen as a traditionalist, hybrid working is definitely here to stay. But we want to ensure that the Lloyds Market or the London Insurance Market continues, you know, face to face. This has been around for 334 years, and I don't think that we should allow COVID-19 to destroy it.
So, I think a combination of hybrid working, we have fantastic technology now. I think if COVID-19 had arrived 10, 15 years ago, we would have been in a real pickle.
So, I think overall, the market has done pretty well and now we have to blend the face-to-face development back into the market and get it back to where we were in February of 2020.
Pat: [00:17:25] Yes, I do. And as you know, I come at this from a slightly different angle to Nick in terms of my role. Any broker you speak with, I'm sure would say getting out and about meeting with their own clients face to face is something that is a real benefit – I believe is of real benefit to them and to their clients as well.
So, I agree with what Nick is saying, I think what we have learned over the last two years, we will take some real positive things out of that. I'm sure I'm not the only person to say this but if you said to me, two, three years ago, you will click on a screen and automatically talk to someone and feel quite comfortable about it. I probably would have laughed at you. But now it's almost second nature to me just to sit in an office, click on a screen, and up pops clients, brokers that we deal with on that screen which I believe firmly will remain something that we will utilize and other brokers will utilize moving forward.
But like I said earlier on, all brokers I'm sure will say that that does not replace the benefits that you get from meeting with your clients face-to-face. And similarly, I know Nick has said exactly the same thing with regard to our friends in the Lloyds and the surrounding capital markets.
Nick: [00:18:58] I think I should get the answers a little bit further as well. I went to see a client in Cambridge last week and we came out of that meeting with far, far better underwriting data or risk data for their renewal than we would have done or we had done when we were doing the same job last year. And so, that’s a real positive by, you know, having that interaction, as Pat calls it with real people face to face.
In my own experience of going over the Chattel loans last summer to meet up with our broker partners proved to be another success by meeting their clients and having that interaction again, understanding their risk profile, face to face rather than trying to dig it out of half an hour or an hour virtual meeting on a laptop.
So, yeah. There are some real pluses on the way back to normality, but I do think that hybrid working is going to be here for I think forever now.
Mia: [00:20:12] No, I think you're absolutely correct. And something you said earlier that I found really interesting was about the despite a number of brokers in the market, there's such a small number that focus on PII. And I wanted -- given all the turmoil of the last two years, do you feel that the value of real expertise and product knowledge in broking has come to the fore?
Nick: [00:20:31] Well, over the last two years, we've seen a further consolidation in the insurance market, the aggregators buying almost anything that walks. So, you know, the population of independent PII brokers getting smaller and not getting bigger. And, you know, we need the entrepreneurs, the generations below Pat and myself to be entrepreneurial.
And, you know, the number of lawyers-brokers is falling. You know, I'm not gonna go back to the 1980s when there were hundreds but certainly, we need entrepreneurs to come through. And it's a great opportunity for generations below me to be on the front foot and to be entrepreneurial.
So yes, you're right. There's always been a small number of expert UK PII brokers but unfortunately, as things are going, it's getting smaller.
Mia: [00:21:32] And it’s that been your perspective as well, Pat?
Pat: [00:21:36] Yes, that's my perspective as well. Just to add a couple of other points on this. And please don't take this as me trying to promote MGIB too much but this applies to all specialists, Lloyds brokers in my eyes. And I think, whenever one of those brokers who I mentioned earlier that were PIIs only a small part of what they do when choosing your Lloyds PII broker, ask us the right questions about them. Please don't just think they can give us access to certain PII markets. Ask some more searching questions about those relationships and what else that broker, that Lloyds PII broker can bring to the table.
And I'm touching on things such as education more than anything else, really. Education in terms of what is going on in the market? what's happening with certain professions? what movements are going on with regard to individuals in the market in some of them? what coverage is being provided for certain profession or for that matter what coverage is not being provided for certain professions? All of these sorts of questions. And I want you to get a good feel for who your PII broker, the wholesale broker may be.
But just as importantly, if not, so, more importantly, it enables you to manage your own clients' expectations. That's crucial that you can keep your own clients up to speed with what's going on because in a soft market, as everybody knows, it's not that difficult to keep telling your clients that hopefully your premium will reduce this year because we're expecting to. In a hard market, it's a lot tougher to manage that client's expectations with rate increases and breadth of cover being restricted and so forth. So, now it's looking positive in my eyes.
Nick: [00:23:38] By reference, we're talking about the London insurance market. It isn't just the London insurance market. I mean, last week, I went to two mainly insurers, but I went up to Manchester to see -- two insurers to talk about our business plan for 2022 and beyond and where -- and to listen to what they are looking to do in this trading year.
So, it isn't just the London market. We strive at MGIB to make sure that we create markets and we talked face-to-face with underwriters across the United Kingdom.
Mia: [00:24:21] And I wonder, despite the consolidation that you've both mentioned in the markets, overall, are you positive about the future for really great specialist brokers in this space?
Nick: [00:24:31] Yeah, well, I think there's some – there’s an excellent PII broker. I'd like to think the MGB is in that group. Certainly, we've taken the business in 22 years from nothing to quite a brand name, I'd like to think. But yes, there’s an awful lot of good, well-versed, skilled UK PII brokers in the market. But I think that the real challenge that we have is the trickle-down knowledge to go down to generations below us. And that's the challenge, I think, that the UK PII market has to resurrect the entrepreneurs of the 1980s and 1990s and to have the strength of understanding of risk to the people in their 30s and below.
Mia: [00:25:29] What about you Pat? Were you feeling positive about the future in that space?
Pat: [00:25:36] I've always felt positive about everything to be fair with you. You know, I always try and look on the positive side of things in most things that I deal with in my life. And I agree entirely with what Nick had to say there. And in fact, just to go back to the point about people returning to their offices, one of the great things that people of the generation that both Nick and I are in is that when you're sitting amongst your colleagues, you're able to pass on that knowledge.
And I'm sure any broker listening to this podcast will agree with me as well that sitting together, passing on knowledge, listening to experience people speaking with clients on the phone, and going to meetings is something those young entrepreneurs that Nick refers to, need to be involved in and enables them to expand their own understanding of PII and other insurances for that matter.
So, you know, things are looking on the upas far as I'm concerned that for everybody there. I hope that we are all back to some sort of normality over the course of the next few months and we can move on and develop and grow our businesses.
Mia: [00:26:51] Absolutely. And I think your point about resurrecting the entrepreneurial spirits is an absolutely fantastic one. I know that a lot of people listening who'd like to learn more about MGB, about its proposition in the marketplace. And I wonder, could you tell me the best way to get in contact with you and the wider team?
Nick: [00:27:06] Well, picking up the phone.
Pat: [00:27:08] Yeah, I was gonna say the same thing, Nick. Always, always happy to speak with anybody. And it comes back to communication. Yes, pick the phone up, stick with this, drop us a line. We're always happy to speak with anybody and to try and assist them in any way you possibly can. And all our details are on our websites in terms of email address is there and phone numbers as well. So, we're always happy to speak with anybody that wants to speak with us.
Mia: [00:27:40] And that’s great to hear, Nick, for providing so many clear updates in this ever-changing PII market. It’s been a real pleasure speaking with you here today.
Nick: [00:27:35] It's been our pleasure.
Pat: [00:27:50] Thank you.
Mia: [00:27:50] Thanks again and for everybody listening, thank you for joining us and I look forward to welcome you back next time here on IB Talk.
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