Real Estate Bulletin - Professional Indemnity Insurance - JLT

JULY 2009ProfessionalIndemnity InsuranceChallenges for Real Estate firms in 2009Recently, there has been a lotof press about the challengesthat some firms have faced inrenewing their professionalindemnity (PI) programmesthis year.It is widely accepted that the recentexperience of cumulative premium/ratereductions are not sustainable in the longterm, and this is particularly true withthe real estate sector, as a result of thedownturn in the UK property market whichhas lead to an increase in claims andnotifications in this area.Generally survey & valuation (S&V) activitiesare viewed as a higher risk than firm's otheractivities, such as general agency activities.Valuers are often a target of lenders lookingto recover losses following a downturn inthe property market. This can also lead toan increase in fraud related issues and it isexpected that an increase in the amount ofproperty related fraud claims will materialisein the next couple of years.Market ConditionsThe RICS website details 41 qualifyinginsurers able to offer compliant coverage,however, this seemingly large number ofinsurers is by no means a guarantee thatrenewal will be easy. This is demonstratedby the fact that these insurers havedifferent appetites:• Not all insurers will write S&V risks• Some insurers will write survey risksbut not valuation risks• Some will write valuation risks but notfor lending purposes• Some have limits on the amount of S&Vwork they will accept as percentage ofthe firm's overall revenue.In addition to these factors, more generalchanges in the insurance market regardingunderwriting considerations are also addingto the pressure of insurance renewals:• Insurers have become more selectiveand are asking more questions,including seeking supplementaryquestionnaires before they willprovide terms

This newsletter is published for the benefit of clients and prospectiveclients of Jardine Lloyd Thompson Limited. It is intended only to highlightgeneral issues relating to the subject matter which may be of interest anddoes not necessarily deal with every important topic nor cover every aspectof the topics with which it deals. If you intend to take any action or makeany decision on the basis of the content of this newsletter, you shouldfirst seek specific professional advice and verify its content.• The imposition of higher excesses,particularly for S&V claims is common• Some insurers won't considerS&V exposures in London and theSouth East• Some insurers are reluctant to writenew policies for surveyors because ofpotential exposure to claims from workundertaken during recent times whenthe economy and property marketwere prospering.Firms that undertake high levels of S&Vwork and those with claims who cannotdemonstrate satisfactory risk-managementprocedures, may find themselves subjectto punitive terms.However, there is still adequate capacityfor firms with strong risk managementprocedures, satisfactory claims experienceand those that are well presentedto insurers.Helping Yourself• Allow sufficient time to prepare for yourrenewal; at a minimum start planningaround 12 weeks ahead of renewaldates• It is essential to have risk managementprocedures in place to mitigate againstpotential claims, but in addition makesure you know how to demonstrate toyour insurers how these procedureswork in practice• Be prepared to provide moreunderwriting information than in previousyears. To differentiate yourself from yourpeers, provide information even before itis sought.This could include:– Banding of valuations– Contractual limitations– Risk management controls, i.e.,valuation authorisation, peer reviewprocess, sign off, etc.– Client selection processJLT Financial& Professional– Working With YouIn this increasingly challenging insurancemarket, you need a dedicated, experiencedbroker that can help steer you through thedifficult market conditions.JLT can provide you with the backgroundto assist you in your decision of insurerselection; it is important to take into accountthe length of time they have been writingS&V exposures, their reputation for payingclaims and their financial rating. Due to theclaims made nature of PI policies it is theinsurer at the time a claim or notificationis made that will need to deal with the claimregardless of when the event giving rise tothe claim occurred.The real test of the value of an insuranceprogramme is always at the time of claimand this is an area in which JLT truly leadsthe way. Our knowledge of insuranceproducts, strong position within theinsurance market and our dedicatedLondon-based claims team allows usto settle claims quickly and with a minimumof adversarial negotiations, leaving you toget back to business with the minimumlevel of interference.For more information onhow we can work for you,please contact:Warren HattwichDirect Tel: +44 (0) 20 7558 3457Email: warren_hattwich@jltgroup.comPaul TowlerDirect Tel: +44 (0) 20 7528 3327Email: paul_towler@jltgroup.comJames GordonDirect Tel: +44 (0) 20 7558 3740Email: james_gordon@jltgroup.comDafydd GriffithDirect Tel: +44 (0) 20 7558 3967Email: Dafydd_griffith@jltgroup.comJardine Lloyd Thompson Limited6 Crutched Friars London EC3N 2PHTel +44 (0)20 7528 4000Fax +44 (0)20 7528 4500Lloyd's Broker. Authorised and Regulated by the Financial ServicesAuthority. A member of the Jardine Lloyd Thompson Group. Registered Office:6 Crutched Friars, London EC3N 2PH. Registered in England No. 01536540.VAT No. 244 2321 96. www.jltgroup.com.© July 2009 261094