With the current dramatic changes in appetite by Insurers offering Architects Professional Indemnity Insurance we have developed a successful renewal plan for our customers to ensure they receive a fair cost for their next renewal.
The author has been involved in Architects Professional Indemnity for 30 years and in that time has seen the standard premium charges for this product steadily fall influenced by increased competition between insurers across the market. However, in the last 12 months and resulting from a number of external factors like the Grenfell Fire, Lloyd’s of London syndicate reviews and the COVID pandemic, Insurance prices have rocketed seeing some firms being asked to pay 200-300% of their expiring premium.
We wanted to share three of the core strategies we use to help every practice obtain a satisfactory renewal for your Architects Professional Indemnity.
We can also confirm that this post equally applies to Consulting Engineers, Structural Engineers and Cladding/Facade Designers who will all be suffering similar problems with Professional Indemnity renewals.
Tip No.1: Don’t be tempted to Flood the Architects Professional Indemnity market with quotation requests
It is tempting to think that by inviting lots of brokers to quote your will drive up competition and drive down the premiums quoted. Unfortunately because of the way the Insurance Market works, this is actually a really bad strategy.
Because the Architects Professional Indemnity market is now very small (especially compared to personal products like Car or Home insurance) you can assume that each broker you approach will simply contact the same insurers for a quotation. That is bad for your renewal quotations because Insurers are getting lots more business opportunities due to the current market and will be spending a lot of time working on each presentation to produce their terms. Anything which gives the impression they are wasting their efforts, such as seeing your risk three or four times in a few days, will mean you get overlooked in favour of the next risk on the table.
Another problem with multiple applications is that each one will often contain slightly different information. That gives Insurers doubts over the quality of the presentations and if they do quote terms these will be harsher to compensate for the element of doubt. Some insurers will even simply decline to quote at all in this scenario.
You could chose to work with only your current broker, but ask yourself ‘Are they an experienced expert in Architects Professional Indemnity?’ Often in the soft market when competition is high Brokers have got lazy, doing deals with a single insurer to sell Architects Professional Indemnity Insurance at a superb low price based on giving that insurer a large volume of business. However, that leaves customers exposed if that Insurer leaves the market and broking staff do not have the experience to source alternatives in a difficult insurance market.
A sign of inexperienced staff providing your Architects Professional Indemnity broking service is a call-centre style operation with no personal point of contact and staff who often have to refer queries because they do not understand the complex insurance product being sold.
If you have concerns you could research the brokers available and choose ONE further broker to work for you, make sure they can talk openly about the current problems facing Architects when looking for Architects Professional Indemnity. Ask them which insurers they will approach and ensure they confirm access to the whole market as opposed to having a deal with one insurer.
In summary, our first key strategy is to avoid adverse Insurer feedback by only using one or two carefully selected expert brokers to approach insurers on your behalf.
Tip No.2: Start Preparing for your Architects Professional Indemnity renewal in good time and prepare proposal documents carefully
Bear in mind that there is a lot of preparation to go into your next renewal. Not only will you spend some time carefully selecting your brokers, you will then need to spend more time than previous years completing a Proposal form and Cladding/Facade/Basement questionnaires in the most accurate way to present your risk. You need to give Insurers with busy desks sufficient time to consider your Architects Professional indemnity and respond to any further questions they might have.
We are starting the Architects Professional Indemnity renewal process for some of our complex customers up to 90 days before their renewal date. This may seem excessive, but when you are a multi-partner firm with many disciplines then each will need to carefully consider their input to the one overall proposal to Insurers.
There are also very important considerations to be given to factors such as declared Fee Income, split of work, largest contract descriptions and these could take some time to discuss properly with your broker. Take time to complete the documentation that forms the proposal as accurately and comprehensively as possible, in that way giving you the best probability to obtain a fair renewal price for your Architects Professional Indemnity Insurance.
In summary, the second strategy is about allowing your practice good time to undertake the renewal exercise and prepare an excellent set of proposal documents for Insurers to work from.
Tip No.3: How well do you understand you fee income?
Whilst Insurers use a lot of factors such as limit of insurance, types of work undertaken, experience and claims history to decide on a percentage premium rating to charge, that rate is only ever applied to Fee Income to settle on the premium charged for your Architects Professional Indemnity Insurance.
The firms Fee Income is a direct representation of the amount of risk to Insurers of a claim. Because of the claims made basis of insurance, the most relevant Fee Income is that disclosed in respect of the 12 months immediately preceding your renewal date.
There are a number of ways in which this can work against you when applying for Architects Professional Indemnity. One common example is where your year nd straddles the insurance renewal date and a firm innocently declares unearned fees projected to be earned in the future. Imagine your fimr had a great current year of work and the fee income is up 20%, but if you look more carefully at fee income earned over the immediate 12 months prior to renewal the income is static. You will be charged 20% higher premiums than you ought.
Other ways in which Fee Income can be inaccurate are where you get paid in advance for work to be done in the future, where you get paid at the end of a long contract for work that was conducted over more than one year and intercompany work involving parent/subsidiary relationships.
To summarise, our third key strategy is to carefully examine your fee income declared to ensure it is totally accurate.
These are just three of the strategies we adopt to help our customers achieve a fair Architects Professional Indemnity Insurance renewal.
We have other advice to ensure the best Architects Professional Indemnity renewal outcome is achieved including looking at Largest Contracts, reviewing Cladding & Facade exposures, considering Contractual Obligations including Collateral Warranties and Deeds of Covenant. If you would like to discuss your forthcoming renewal with a broker who works hard for all their customers then please contact us.