Packages require flexibility
Professional risks is broker dominated and likely to remain so. Although some insurers offer cover direct to SMEs online, specialist broking skills still drive the majority of business.
In fact, specialist product knowledge and client contacts have become more vital as new risks have emerged in the post- financial crisis business world. To keep up with increased pressure and scrutiny on business managers, insurers are rewording policies far more often than before.
AXA introduced a new management liability product at the Biba conference last week (10 May), Zurich is updating all its PI products at the start of June, and RSA has a new suite of mid-market commercial combined select packages. Brokers are striving to keep up with the pace of change.
AXA head of management liability Callum Taylor says: “Management liability has evolved over 10 years. It’s a higher level, to protect the individual and the company from a claim, for example, for sexual harassment. Almost 90% of claims are made against the company – but most brokers don’t give that breadth of cover.”
AXA has taken D&O as a base, and developed the wording from there. “We have the market-leading wording,” Taylor says. It allows for an unlimited number of claims per year, rather than setting a ceiling for any one claim; and it does away with an excess charge on employment claims.
AXA is also adding bells and whistles to professional risk packages in the form of advice and support services, including access to free legal advice.
Towergate Professional Indemnity managing director Alan Eyre described the business as “sectorised”, with specialist product and client knowledge needed to support each profession.
In mid-market construction (architects, consulting engineers, contractors and project managers), for example, insurers are writing a lot of professional liability business despite the fact that rates are “far too low”, says Eyre, because claims have held off.
“Consulting engineers are by nature quite conservative and quite loyal. They’re attractive clients, because we’re able to differentiate by technical knowledge and support, and to build a relationship. They need our expertise and support on a weekly basis, with the wording of appointments, notification of claims, claims support, documentation support, and with specialist advice, for example if they’re going into the Middle East.”
A number of new market participants in construction lines are providing capacity to MGAs to write new business. CNA is targeting mid-market construction, Allianz has opened for business in the north of England, and Zurich is offering legal advice to clients in construction from a panel of law firms.
Value versus volume
But attitudes vary. AXA is targeting volume business and wants to be the market leader in the SME market with £50m GWP in five years. Taylor says: “It’s a new sale for brokers, predominantly to unlock profit from existing clients.”
AXA’s target average premium for management liability is £1,000 and its volume goal is 50,000 written policies.
Business is also growing in media and technology, as new risks emerge in that sector. “A huge amount of work is being done on the internet, with issues such as security of data, how it is stored and what happens if it’s accessed by third parties,” Eyre says.
Banks, stock brokers and fund managers are also seen as offering the potential for profit.
But solicitors’ PI, by far the most troubled pocket of professional liability, is the least attractive of all such lines right now.
Eyre says: “The ARP remains in place for 2011, and rates might harden but it depends on whether a new competitor comes in. Most insurers will look to put up rates, but they also want to maintain market share.
“Some of the big insurers are on the margins of saying ‘why are we in?’ Whether any will step up and say ‘I don’t want to do this, it’s a very difficult market’, I don’t know. It would be a brave move on the part of any insurer.”
Restrictions on wording in solicitors’ PI also make it harder for insurers and brokers to differentiate.
Zurich’s updated PI lines are designed to enhance value for clients with add-ons like legal helplines and other advisory services.
“We are trying to drive change in solicitors’ [PI] that will enable us to tailor policies, add extensions and be more flexible,” says Zurich head of professional and financial lines Stuart Quinlan.
“We’re not able to specifically tailor it, the wording is the broadest with no differentiation at all between a top 100 law firm and a firm with a few partners.”
Without the ability to tailor packages to accurately reflect a firm’s specific risk, sectors like solicitors’ PI are likely to become even more unappealing.
“Differences between policy wordings can have a huge impact in the event of a claim,” Eyre says. “You can’t really insure someone properly unless you understand what they do and what their risks are.”