Caroline Jordan discovers that the growing PI market is the hottest ticket around for insurance professionals on the move
Professional indemnity (PI) - both within the broking and insurer communities - is the hot business sector. Poaching is rife as newcomers seek to set up shop, salaries are at top dollar and there is a marked shortage of people with experience, which continues to fuel demand.
This was typified last week, when in a sudden volte-face, 12 members of an Alexander Forbes PI team which had been poached to join start-up Prime Professions decided to stay put.
Who knows what made these people stay but, according to one recruitment consultant, some hefty pay rises, tasty incentive packages and promotions would have been among the sweeteners. That, and, as he put it, "it may well have been a case of better the devil you know."
The sense of relief from Alexander Forbes was almost palpable as it relayed the good news to the press.
In a statement, the broker said: "Many of the staff who had originally tendered their resignations have now committed their long-term future to Alexander Forbes. The defections have been limited to a closely-knit team rumoured to be leaving the company to various new homes/competitors for the past 12 months.
"Alexander Forbes Professions has acted immediately to strengthen the management of the business. James Houlder has been appointed as managing director and additionally key appointments have been made to the executive board."
These include the newly appointed chief operating officer Tim Kershaw, who is understandably upbeat. "The picture is still unfolding, as some of those staying have been given new responsibilities but, of course, we're delighted. Where we've gaps to be filled we'll recruit, but as I speak, these are shrinking by the day."
As Kershaw celebrates, Duncan Philpott, who will run the Primary Group launch Prime Professions and was contacted about recruitment trends, apparently has less to say on the matter.
A Primary spokeswoman said: "We are still in consultation with the FSA for this business and there will be no external publicity until January."
So what is the true story? Should all PI insurers and brokers start considering golden handcuffs deals for their key people, or are there ways of alleviating the situation?
The recruitment consultancy sector is doing well at the moment as more PI jobs crop up and salaries are increased to attract people to switch.
- Among the companies that have expanded their PI capabilities within recent years are Markel and QBE. Newcomers include WR Berkley and Catlin.
Robert Charles, associate director with Joslin Rowe, says new entrants have led to more vacancies, but that the softer market is starting to slow the market down.
Looking at the PI market in general, he says demand is strongest for business developers. Strong competition means there is now far more choice for professionals when it comes to buying cover, and so smart operators are needed to get out in the market and win over key clients.
Charles explains: "PI right now needs guys who can get doors opened. A good developer with a few years' experience is looking at a basic salary of around £50,000 with maybe as much as £30,000 commission on top, plus a good benefits package.
"It goes without saying that these are people who are professional and are at ease dealing with the professions. They are a credible force and can sell to the big firms of solicitors, accountants and surveyors - these people don't come along every day and so can expect to be paid well."
People who work in PI may be better paid, but many would say it is a more demanding sector than less specialist areas of insurance.
Neville Miles, a partner with brokers First City, says his firm has boosted the number of trainees it takes on and adds that those who make the grade need more than technical competence.
"Brokers meeting clients will often be dealing with senior partners who need to understand what they are buying. In simple terms it means having the right attitude and your top button done up, being adept at making conversation and showing courtesy.
"We have people from all backgrounds and we're not elitist, but this remains a fairly traditional market and you need to understand this."
The skills shortage within the insurance sector is hardly news, but it does appear to be biting particularly hard within PI.
It does not help that this is a cliquey sector, based largely within London, where jobs are often filled based on word of mouth. As Kershaw says, companies such as Alexander Forbes are increasingly taking on graduates, often with law degrees, but it takes some time to get them trained up.
Many PI brokers and underwriters are required to have knowledge across a range of professions and these will typically range from those where cover is mandatory, such as law and accountancy, to newer areas such as IT and media.
Most companies will train staff by pairing them off with experienced PI employees, backed up by general insurance knowledge supplied through the CII examination study.
Kershaw adds: "We offer PI training through our training programme, the Learning Zone.
"But we have also been looking at the need for recognisable PI qualifications and whether we could get involved in sponsoring these.
"We would be prepared to do this with the CII and, longer term, it would really help to have better standards and benchmarking."
Miles says his firm is piloting an online system from Searchlight Solutions to bolster its in-house training facilities, which includes some specialist modules on PI.
Training is vital, but having the best teams in place can also increase the risk of being poached. According to Kelvin Curran, a partner at First City, encouraging loyalty within PI is particularly important because it is a high value business.
"From our point of view, offering the prospect of a share of company ownership is attractive and if someone proves their worth, they can be looking at this within a few years."
He explains that First City has also upped the number of graduates it has taken on within the past few years. "This is a competitive market and employing those with sales and marketing ability is essential.
"For the past few years, we've taken on graduates from Meta-morphose, a company that places young people in professional field sales roles and also provides them with a year's training and support. This scheme has worked well for us."
Nick Pointon, a director with broker PYV, says his firm is now taking on a regular supply of graduates each year. "There is a shortage of experienced staff, but we want to make sure we are bringing on people internally."
But with many industry sectors such as retail, banking and fund management competing for the brightest and best graduates, why would they choose to work for a PI specialist insurance broker?
Pointon says there is no contest. "This is the best job in the world. It is intellectually demanding, but at the same time not rocket science.
"You need a good balance between technical knowledge and being able to support clients in a consultative role. You need to keep an eye on risk, market and regulatory issues and if you are in a client-facing role, be able to build strong relationships as well as win new business."
He explains that packages on offer to graduates are generous and will include good pensions, healthcare and bonuses.
Pointon says graduates might typically earn in excess of £20,000 with a bonus, and that salaries as high as £50,000 could be achievable for high flyers after a couple of years.
There is no doubt that there is a far bigger PI labour pool in London, even though there remains a shortage of quality staff. In the provinces there are even fewer staff to choose from.
Gary Horswell, regional managing director for Alexander Forbes Professions, says: "In London, it's a village where everyone knows everyone and people move between companies with relative ease. Outside of London, it is harder to find experienced people."
He is based in Bristol, where Alexander Forbes has one of the largest PI provincial offices, employing some 42 staff. "You can't necessarily expect people to move from London, which is why we grow our own," Horswell explains.
Gary Head, underwriting director with Hiscox Professions, says problems can occur if PI specialists focus too much on niche products.
"We underwrite many niche areas ourselves, but operate a training system called Passport, which allows employees to understand other sectors. For example, Sam Franks is one of the country's best technology PI underwriters, but he can also write an office package."
He adds that because it is less commoditised, PI continues to demand higher skill-sets than other areas and argues that while brokers may claim their roles are more stressful, underwriters can certainly feel the heat too.
"PI is a very volatile sector and right now we are seeing the cost of reinsurance going up, while there is pressure on premiums because of competition. If you look at the market as a whole, PI has never made a sustainable long-term profit and this is something we have to address."
Head explains that the company sees development into new areas as a way of tackling this problem.
"We are now looking at sectors including life coaches as a target for buying PI. The staff we use to reach new markets need to know what they are talking about and have first-rate business development skills, backed up by technical expertise."
Despite the challenges, there is certainly enthusiasm among those working in PI that it is a sector that is going places.
Like Pointon, Horswell is a firm believer that this is one of the best areas of insurance to work in. "You see some incredible claims ranging from those where minor errors have caused huge problems to those involving massive fraud.
"The legal and regulatory landscape keeps changing and brokers need to be up-to-date with all the issues.
"For example, one area we've been looking at is surveyors and where they are now likely to have added exposure when home information packs are introduced."
Horswell agrees that for those dealing directly with clients, strong people skills are a must. "You often gain a strong insight into a client's business and see their highs and lows. There can be cases where if a case is lost a client could face bankruptcy. The skills in dealing with these cases are not unlike those of a counsellor."
He adds that the strongest personalities are often found within broking rather than insurance companies. "Brokers tend to be paid better than underwriters and they usually need to be more entrepreneurial and dynamic. There is a view that brokers tend to work harder, at renewal time in particular. There can be a lot of pressure and long hours."
No doubt plenty of underwriters would disagree that they have an easier life and this is also likely to be the case with many insurer PI claims staff, who frequently deal with complex cases.
Once working within the sector, Horswell insists there is scope to move around. He says Alexander Forbes has taken on good people from insurers to work within broking, and that those with back office roles can switch to positions where they handle clients directly.
"If you're ambitious this is the area where you can quickly make a mark."
And, no matter which side of the fence they are on, anyone in PI who is doing a good job but who feels they are underpaid and unappreciated would be well advised to check out other opportunities - the jobs are out there and Prime Professions is just one who is out in the market.