Blog: Insurance in the lockdown
Manchester Underwriting Management’s Richard Webb on how the coronavirus situation could play havoc with the PI market.
I am sure there are some brokers longing for the calmer days of the professional indemnity (PI) soft market, which began coming to an end in 2018. Since mid-2018, the PI market has hardened, more so for construction professions and less so for accountants and insurance brokers although rate rises had begun to gain some momentum in Q1 of 2020.
But Covid-19 has added a big twist. The market was already hardening for a reason, premiums have been far too low and unprofitable. The damage caused by the last soft market to most lines of business had only begun to be repaired and now the insurance industry is being faced with what some are predicting will be the largest loss in insurance history. Only time will tell.
There is a lot of noise right now in the wider media and the reputation of our industry is taking a bashing when it comes to cover and wordings. Rightly or wrongly, some people are upset with our industry which makes a difficult trading time even harder.
In the professional services world, the reality is people and businesses still need to buy insurance. Even if a business has furloughed staff and wound down its operations it needs PI cover for past work. There is a risk to a business when too many staff have been furloughed and the business does not have sufficient resource to manage the reduced workload. This is when simple mistakes can happen.
Working from home can create issues, especially with quality control and managing workloads. The management of all firms need to be aware of how they manage the quality control and risk management elements of their business.
Some businesses have decided to cancel their policies or reduce the cover they have bought with a view to saving costs. This is understandable but it can leave them exposed. They may no longer fulfil contractual agreements due to the limit of indemnity being reduced. The claims made nature of professional indemnity can sometimes be forgotten. Cancelling the policy is cancelling the cover entirely.
At some stage the lockdown will begin to relax and people will gradually return to work. As businesses build up momentum, any changes made to their insurance policies during lockdown can easily be forgotten.
Whilst all this creates challenges for clients, it creates different ones for brokers. Managing clients in these times is not easy and that means potentially unhappy clients, which can easily lead to disputes with their broker. Now is the time when insurance brokers need to make sure their own house is in order. Any requests from clients to change or cancel policies and subsequent advice given by their broker should be recorded in writing. It is easy when working from home to rely on phone calls but when a claim or a complaint goes before the ombudsman or a judge, the best defence is a written record.
It is easy in these challenging times to forget about the basics, making sure clients are provided with the right advice and making sure it is recorded, just in case a complaint arrives.
Richard Webb is a director at Manchester Underwriting Management.
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