Several high-profile insurers have withdrawn from the financial adviser market due to poorly performing accounts. As a result, the market for professional indemnity insurance has hardened. In a sector where so few insurers compete, there is less competition. Consequently, the remaining insurers have been able to increase their rates and return to profitability after suffering heavy underwriting losses in recent years.
As a result, insurers are now more cautious if a company provides advice in high-risk areas. You could significantly improve your chances of obtaining competitive PI by following the tips below and also reduce your chances of seeing premiums rise.
Start Early
A number of factors can contribute to the premium and every business is different. Factors include; the firm’s fee income, risk profile i.e. types of products/investments they are advising on, claims history, experience and qualifications and the level of risk management procedures the firm has in place.
Underwriters have different risk appetites, in which case they may adopt different rating structures, targeting specific types of firms.
The key to obtaining the most comprehensive cover at the most competitive rates is to start the research process early to review the market, ideally this should be up to three or four months before the renewal date. The earlier you start the process, the more time you and your broker will have to prepare a thorough and detailed application for the underwriter’s judgement. As a result, you will have more time to negotiate the terms and reduce the likelihood that the terms will be left to the last minute.
Various insurers have different terms and conditions, so giving yourself a bit of time will allow you to understand the coverage fully, so your decision is not based solely on price.
Make the right impression
Filling out the forms neatly and accurately is important to creating the right impression. Additionally, providing additional information can help your insurer/broker understand your risk better. Including copies of your terms of business, complaints register, investment proposal document, and CV can be very helpful when submitting your proposal.
If you have had previous claims, describe what happened, what the company did to prevent reoccurrence, and the amount of the claim.
Demonstrate procedures for managing risk
Describe what your firm has done recently to reduce the possibility of a claim occurring, and provide copies of any recently updated documents. To get the best possible quote, make sure you make your proposal form stand out from the crowd; underwriters receive hundreds of applications.
Use a broker
Professional Indemnity Insurance is always best sourced through a specialist broker who is on the FCA list of approved PI brokers. In some cases, a managing agent functions as both an agent for the insurer and an agent for the insured.
In addition to carrying out a thorough investigation of the market, independent brokers can obtain quotes and negotiate with the various insurers available to them. Brokers can also provide additional claims management assistance, assisting you in dealing with your insurer if necessary.
Understand exclusions
Insurance companies’ IFA wording, as well as the terms agreed or quoted to the individual firm, will greatly determine any exclusions. An insurer’s standard policy wording will detail all of its basic terms, conditions, and exclusions.
There is a variation in IFA wordings between insurers, so it is important to understand and check the different options available to the firm. It is common for nonstandard exclusions to be applied as well. Recent additions to the list include Arch Cru, Key Data, Matrix and unregulated collective investment schemes. Insolvency exclusions are also used by some insurers, although the wording varies from one insurer to another. In order to avoid misunderstandings later on, it is vital to always check and understand these definitions from the outset.