The property market is currently in the spotlight as many insurers see the potential for the various political and economic uncertainty to negatively impact future house prices and in turn, a recycle of the professional indemnity claim volumes we saw post 2008.
Brexit has hit the domestic market with the Office for National Statistics saying the average house price in the UK rose by just 0.6 per cent in the year to February 2019, the lowest rate of growth since September 2012, while house prices in London fell by 3.8 per cent.1
A barrage of new tax rules for landlords has resulted in landlords buying fewer homes than at any time in the past nine years according to a report from Hampton International, while UK Finance reported a 15 per cent decline since 2017 in demand for buy-to-let mortgages.2
The Bank of England has also warned that interest rates may need to rise over the next three years, another factor which can affect the property market.3
Rates and market capacity for the profession can be extremely volatile, so it's important to have some understanding of how the market works to be able to make an informed decision when purchasing PI Insurance.
Here we provide answers to some of the basics:
Key points to consider when searching for the best PII
How big is the market for Surveyors’ Professional Indemnity Insurance?
With more than 10,000 firms practising in the UK, from sole practitioners to global practices, the PII market for Chartered Surveyors is a big one, reported to be worth around £60m in terms of premium income. All Chartered Surveyors are required by the RICS Rules of Conduct to take out Professional Indemnity Insurance and choosing the right one for you requires research.
Why do you need an insurance broker?
It can be a complicated process to find the right insurance and so a broker that also provides professional advice helps to save time and lower premium costs. Effectively managing Professional Indemnity Insurance in a changing market place demands the appointment of a specialist broker who understands the impact those changes have on premium, risk management, policy coverage and claims.
Why cost shouldn’t be the only driver?
Rates can vary depending on the size and discipline of a firm. Premium rates can vary considerably. Rates can also be discounted for start-ups with no history or legacy to insure. As an example, Howden offers two PII products: one for firms paying over £10,000 premium and one for smaller firms. It can also seek alternative quotes from the majority of RICS listed insurers. Minimum premiums normally apply but be wary of buying insurance on price only. The quality of the insurance is vital and RICS advises using a specialist broker.
How important is a well completed proposal form?
As with any insurance, the level of risk in relation to the insured is considered when calculating a premium, so this can be a complicated process. A fully-completed proposal form providing the following information will allow an underwriter to assess the risk accurately:
- Size of the firm (fee income)
- Type of work being undertaken
- Claims history
- Number of partners or directors and staff ratios
Cover for your firm
RICS mandates all registered firms to be covered by PII. So, trading without adequate Professional Indemnity Insurance is a serious breach of regulatory requirements - as well as bad business practice. A firm will be prevented from trading and even closed if they fail to obtain adequate cover.
The RICS rule book sets minimum levels of cover based on a firm’s income. These are:
Turnover £100,000 or less: £250,000 limit of indemnity
Turnover £100,001 to £ 200,000: £500,000 limit of indemnity
Turnover of more than £200,000: £1,000,000 of indemnity.
Where do I turn now?
Howden is the Royal Institution of Chartered Surveyors' preferred Professional Indemnity Insurance and preferred Cyber Liability (CL) broker. It provides policies for businesses undertaking the full spectrum of surveying disciplines and offer risk management advice and PII broking services. Our clients range from sole traders to the world’s largest property and construction consultants.
Howden also offers a Professional Indemnity Insurance Review service. This is a confidential, free of charge service which helps you establish if you are paying a competitive PII premium and provides guidance on the steps you can take to reduce the cost of PII.