Rates likely to match legal rate increases
Brokers are facing a huge 20% increase in their professional indemnity insurance for 2010 after a rise in negligence claims during the financial crisis. “We are seeing signs that the market is increasing rates and we are probably seeing rises in the order of 10-25% depending on type and size of broker,” says Alan Eyre, managing director of Towergate Professional Indemnity.
Other professionals such as lawyers, financial institutions and some in the construction industry have faced bigger hikes in 2008 and again this year and it’s highly likely that brokers’ PI will see even more hikes beyond the 20% increase. Eyre points out that some legal firms have already seen rates as high as 25% and those with conveyance even more. He says rates are not as high yet for brokers yet but that they have the potential to equal the legal profession’s rates. “We are seeing the first serious signs of rates hardening across what I would call the higher risk sectors. Within that I would say this includes insurance brokers, financial institutions, the legal profession and certain elements of the construction professions.”
Eyre said there was increasing risk in covering brokers because of the rise of negligence claims. “The issue there is that if the broker doesn’t document properly he will suddenly find the client comes back and says the risk was not explained properly. My concern is not so much on the letters and information that goes out to clients but the notes that are maintained following client visits and on conversations with clients. It’s really about documenting these and less about the compliance process of confirming terms, etc.”
Eyre adds that the client cannot be expected to read the entire policy. “Cover notes and policy documents are all very well but is it reasonable to expect clients to read it cover to cover? No, they are not, because they are going to rely on advice they get from their broker in his placing arrangement of the cover. That’s why brokers could still be exposed.”