The Relentless Rise of Professional Indemnity Premiums
Professional Indemnity (PI) insurance is a vital piece of business insurance for anyone who provides a professional service, gives advice, looks after data, or is responsible for Professional Indemnity in an organisation. However, recent months have seen insurance premiums for PI increase, as corporate business failures and natural disasters have pushed up the volume and size of claims. How PI Insurance protects a business The reason why PI is so important is that it The harder the market, the higher the premiums
The current market Over the past few years there has been a sharp increase in large scale ‘disasters’ which have resulted in significant insurance claims. Events like the collapse of construction giant Carillion, and the flammable cladding exposures leading to the Grenfell fire tragedy have triggered a number of large legal and financial claims which are still going on and which will continue to impact the financial markets for years to come. Added to which are the rising number of claims in an increasingly litigious society, which have all led a hardened PI insurance market within the sector.
provides protections for your business if you are found to be negligent or your products, advice or services contain any errors or omissions and you are then sued. PI insurance may be able to help you cover legal costs or rectify a mistake in your work that has caused the claim. Many professional bodies require a business to hold PI insurance before they can be considered as a member – these include contractors in the construction, IT, financial, and energy sectors. It is now, for example, very common for a construction contract not to go ahead until the contractor shows they have a specific level of PI insurance, so that all parties are protected by the insurer.
A ‘hard market’ means that demand for PI is the same or higher, however PI supply (from insurers) is low, and getting lower, especially given shrinking PI capacity at Lloyds. As a result, premiums are rising, and there may also be additional restrictions on your existing policy, and tougher criteria to meet in order to secure cover for your business. Further to this, many experts in the insurance industry are predicting that the PI market will continue to deteriorate in the coming months, making it increasingly difficult for many firms to secure adequate PI cover. As a result, it’s crucial for businesses to take appropriate actions to limit the impact of the hardened PI market on their cover options. The good news is that PI insurance is tax deductible, so speak to your tax adviser for more information.
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