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Straight to the point on the realities of the PI market

Trust. Security. Understanding. Three words that summed up the Angle 2022, Markel UK’s thought-leadership event, on 19 October at Code Node in central London.

Author: Markel UK

The conference focused on the professional indemnity insurance (PI) market and the challenging rate rises and cover reductions have created for customers and brokers alike.

The Angle needed to address the unsettled backdrop that the insurance industry is facing in order to restore these three key pillars: Trust which has been tarnished by cost rises, market exits and unsustainability, security whereby businesses should feel they can prevent a claim before it even happens, and understanding as it becomes clearer that SMEs clients don’t understand why the PI market is going through such a difficult period.

Split into two distinct sections and facilitated by Times Technology Business Editor, Katie Prescott, the busy conference room heard about the challenges from a customer perspective and then from an industry viewpoint. By hearing from these two points of view, brokers could come away armed with a new perspective on how to tackle previously difficult conversations with customers.

Katie kicked off proceedings by recounting the story of a hairdresser during the pandemic who received no payment and no communication when the pandemic hit – an anecdote that appropriately captured why faith in the industry is at an all-time low.

A challenging environment for SMEs

The first panel consisted of Derek Cribb, CEO of IPSE, James Trezona, MD of the Rooster Point creative agency, and Beverley Bates, advice services director at Markel Law.

James Trezona talked about his business and how market volatility and uncertainty are two key challenges they face.

Economically, James has seen a slight slowdown in invoice settlement and more scrutiny on whether projects have delivered on their promises. Against this backdrop of increasing financial uncertainty, the last thing his company needed was expensive insurance, especially where the reasons for cost rises and cover reductions are not well explained or understood. James cited his broker’s poor ‘because lots of people have pulled out of the market’ explanation, saying that he would have been more comfortable being told that prices had been historically too low in the past – a point linking back to the need for greater customer education and understanding.

Derek Cribb backed up many of James’ comments. Uncertainty remains a real challenge for IPSE’s members and the support his organisation provides is now as much around staff wellbeing as it financial and operational issues.

An analysis of the IPSE website had shown that late payment template letters have started to be downloaded in greater numbers. This suggests the potential for real hardships to come which is something that is a real concern for the organisation and their members.

On the subject of PI insurance, Derek had strong opinions that insurance should give you a feeling of security and not the feeling that it could let you down at a crucial moment – something that had occurred during the pandemic. Closing the ‘understanding gap’ between insurer and customer was important, which is why the role of a broker and the types of questions they ask is so important.

Beverley Bates was able to provide an insightful picture from her first-hand knowledge of what advice people are seeking from Markel’s legal helpline.

Beverley confirmed that the helpline is receiving more calls around finance, debt and employment queries. SMEs are worrying about their staff and how they can be more flexible to accommodate changing work patterns and retain their workers.

More specifically, people seem to be more concerned about debt with questions such as ‘How long should we wait until we issue proceedings?’, ‘How do we challenge payment for a service that hasn’t delivered as expected?’ and ‘How do we extract ourselves from expensive utility contracts?’ becoming more common – all questions that point to a widespread lack of security across the board.

The session closed with a series of audience questions exploring the issues raised in more depth. Many brokers in the audience agreed that what they had heard was a fair reflection of the conversations they were having with customers and that it was useful to have the points reinforced from different perspectives in order to gain a new understanding of how to speak to their customers moving forward.

The industry has to wake up to customer needs

Part II of the day focused on the industry perspective with Ross Dingwall (Partners& Managing Partner, Scotland & North England), Richard Brooks (Broker Development Director) and Katie Scott (Editor at Insurance Times) on the panel.

Katie pointed to some of the areas most challenged by the current difficulties in the PI market, including construction and accountants, with 100% increases in rates not uncommon. Added to the difficulties – both for customers and the market - is the fact that claims frequencies are likely to increase if we enter a prolonged downturn.

Katie continued by saying that capacity was less of an issue with some having returned to the market as rising rates had created a more profitable environment, but that the underwriting cycle didn’t help anyone, not least end customers, most of whom don’t understand what an underwriting cycle is, let alone why it should affect them.

Ross continued the discussion by addressing the question: “How do you square trust with rising prices?”. Ross is a passionate believer that the insurance sector is a force for good, but it has lost its way to a degree. The sector has to take a hard look at itself and crucial to servicing customers is having clear conversations about the insurance options available, the features and benefits and what is/isn’t covered.

Ross maintained that Partner& is still seeing prices going up and cover reducing but this trend has started to plateau in recent months due to capacity coming into the market. However, the traditional cycle isn’t helping anyone and it’s only by working together that we can hope to reduce its impact.

Richard pointed out that Markel has remained relatively consistent in this market, in terms of both cover and price. And while challenges remain, this stance is a strategically important one for the company. With Markel’s added-value legal and tax business services, including a legal helpline and contract review service, SMEs have the tools available to reduce their risk and present a stronger picture for underwriters at renewal. Markel therefore seeks to repair industry trust, security and understanding with it’s PI proposition.

Ross validated Richard’s comments saying that brokers had a big part to play in helping clients present their risk in the best possible way in a bid to secure reasonable renewals terms.

Insurer service levels were also high on the agenda with Ross Dingwall saying that this service was becoming a major issue. Such was the problem that some of his company’s staff had left for a different industry because they were so frustrated having to deal with insurers. In Ross’ view, consistency, clarity and accessibility were all poor.

Katie pointed out that the move to home working has made it more difficult to get through to insurers, according to a number of brokers she had spoken to.

Katie Prescott asked whether a new industry body should be established to monitor insurer service, however, all panel members were against this idea. Richard pointed out that most insurers have their own NPS surveys and there are a number of external studies that monitor service, not least the Insurance Times Five Star Survey.

Finally, the panel members were asked to crystal-ball gaze and predict where the PI market might be in the coming months.

Ross was of the view that some sectors will still be challenging but the biggest spikes should have come and gone. Richard said that if everyone works together, a more consistent market is possible. And Katie thought that inflation would maintain the upward pressure on premiums but the brokers she has spoken to are all hoping for a more stable PI market.

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