Andrew Wallen, solicitor/deputy claims manager – PI, HCC, on why talking to your insurer sooner rather than later is always a good idea
You know you’re a professional indemnity (PI) insurer the day you find yourself asking a policyholder “Why didn’t you let us know sooner?”
Yet, more often than not, you already know – and can sympathise with – the answer. Any delay will usually be down to a combination of a policyholder’s concerns about facing a renewal rate increase and their uncertainty about which circumstances need to be notified to the insurer.
What to notify?
Although PI policies are written on a ‘claims made’ basis, policyholders are still required to tell their insurer about a circumstance that could lead to a claim. However, what and when to notify can be a thorny issue for brokers, insureds – and even some insurers.
Insurers tend to take one of two broad approaches. Some require policyholders to notify them of anything that ‘may’ or ‘might’ lead to a claim. But unpicking what this means can be contentious. It offers more certainty to require notification for anything that’s likely to give rise to a claim. It’s much simpler to grasp that a circumstance is something that has a greater than 50% chance of leading to a claim – in other words, a claim is more likely than not.
When to notify?
We always stress to brokers and insureds that they should tell us as soon as they are aware of a circumstance that’s likely to lead to a claim. Getting the insurer involved early means we can use our expertise to handle matters before a claim develops. As well as potentially saving money, this can also save the insured the time and resources needed to help investigate and defend a claim. In one case, early notification of deficiencies in the design of a heating, ventilation and air conditioning system meant we were able to grant the policyholder authority to incur the costs of remedying the problem. This was much more cost effective than waiting for a claim to happen. In another case, early notification meant we were able to help an architect resolve issues with a planning application before their client was even aware of potential issues.
Of course, matters can’t always be resolved without a formal claim and involving lawyers. But having early notification still helps those managing the notification to be ready to respond to a claim.
A key barrier to early notification can be a policyholder’s worry that simply making a notification will lead to a premium increase; at Tokio Marine HCC, this is usually not the case. Removing this barrier means brokers and policyholders know they can talk to our experienced in-house claims team the moment that something seems likely to lead to a claim.