Brokers have considerable opportunities to develop their businesses by offering PI cover to the emerging professions, says Gary Head
With new capacity continuing to flood into the UK professional indemnity (PI) market and rates beginning to level off, now is an appropriate time for brokers to take a careful look at their customer base to see where possible growth opportunities lie.
The PI market has traditionally focused on professions such as solicitors and accountants. But there is now an increasing number of emerging professions which require PI cover - not as a legal requirement but as a business imperative. This growing appetite for PI comes from diverse occupations including IT, advertising, marketing, public relations and management consultancy.
And there is also a very significant opportunity provided by the new PI market for 'secondary intermediaries'. From 15 January 2005, intermediaries who sell insurance as an add-on to their main product will be legally required to buy PI cover. These add-ons include warranties on consumer goods and protection plans on financial products.
This presents brokers and insurers with a massive opportunity. The FSA estimates that there are between 70,000 and 150,000 secondary intermediary firms in the UK.
But, equally, brokers don't have to look too far to see real business opportunities. A broker who has sold an office insurance policy to a home-working freelance marketing or public relations consultant should be asking its client whether he has considered PI cover, given the increasingly litigious business environment.
These days, most brokers have friends and contacts in the IT business, but how often does the subject of PI cover for these people come up? Rarely, I suspect. In reality, their PI exposure is significant, as they are increasingly being sued when systems don't meet their clients expectations.
We believe that insurers and brokers can certainly add value to their clients' businesses through PI cover.
One recent case we successfully defended in the High Court cost us £1.3m on a relatively small contract dispute. Without our legal assistance, the client would certainly have gone out of business.
So what are the sectors which brokers should focus on? We believe the best opportunities lie in the IT, media and consultancy industries - from internet service providers to wireless LAN experts and post-production houses to change management consultants.
There are also those risks that fall outside of the more recognised professions, whether traditional or emerging.
Brokers should be able to work alongside insurers such as Hiscox to understand the less standard risks and design solutions for them.
While price will undoubtedly be a major factor for brokers, they should bear in mind the wider market experience of the insurer in question and its claims handling experience.
The new emerging professions certainly hold the key to unlock this massive untapped potential.