Miscellaneous professional indemnity
In this chapter of our Annual Insurance Review 2018, we look at the main developments in 2017 and expected issues in 2018 with regards to miscellaneous professional indemnity.
Key developments in 2017
With over 500 types of professionals now purchasing professional indemnity (PI) insurance, from arborists to zoologists, miscellaneous PI is firmly settled as a class in its own right. What was pioneering five years ago is now a firm fixture in the insurance market, with virtually every major insurer providing products in this arena.
Last year we reported that we expected claims in this area to be difficult to handle, due to the very nature of a class where businesses are not governed by regulatory or representative bodies. This has been borne out in 2017. Experts are difficult to source. There is no recognised body of experts, and claims – even poor ones– are therefore difficult to defend. For example, this year we settled a claim against a cow nutritionist for anominal figure, despite the sum claimed being £3m. However, each side incurred £30,000 or more in expert fees, in addition to significant solicitor fees. The claimant’s victory was therefore perhaps a pyrrhic one.
This highlights the necessity for insurers, when placing risks, to get under the skin of a business, to understand how it might develop – and to consider how claims might arise, how they may be defended,and the difficulties involved in dealing with spurious or vexatious claims (which can have value).
What to look out for in 2018
It is, as always, difficult to spot trends in a class as diverse as miscellaneous PI. This was a class invented by the insurance industry and often thought of as a cash cow; few claims were brought and most risks were essentially benign.
However, we anticipate that claims in this area will increase as claimants and their solicitors become more savvy and realise there is now a wide world of insured professionals to claim against. The internet remains awash with solicitors advertising their willingness to take those instructions. As more and more emerging professions use the fact that they have insurance in pitches, the knowledge of its existence spreads among the general public and, as a result, we expect to see more and more unsophisticated claimants “giving it a go.
”There is also a concern among risk and insurance managers that it can be difficult to explain the value of insurance to their executive boards. This may explain the perception that this class is becoming more commoditised and that insurers may be giving away more cover than in previous years. At a time when,arguably, brokers rule the roost (an estimated 80% or more of all UK professional indemnity premium is placed through brokers), we anticipate that this will only increase, as policies become more akin to general civil liability policies and brokers put pressure on insurers to increase the scope of cover for reduced premiums.
This is a class of business that particularly benefits from insurers and brokers adopting a collaborative approach to find policies that meet all parties’ needs – which, for unsophisticated insureds, may well lie in advisory and value-added services including legal, media, and IT support.
Download our full Annual Insurance Review 2018 for more insights.