A recent survey conducted by the Association of British Insurers will come as welcome news to those businesses that have been hit by the spiralling costs of obtaining professional indemnity cover.

According to the ABI, PI premiums rose only 4% last year, compared with a 40% increase in 2002. Although this is good news for firms, and reduced premiums may be initially attractive, we would strongly advise caution.

It is a constant of the insurance market that as cost rises slow, insurers try to cushion the effect of declining premiums by seeking to limit the cover that they provide. Firms should check that their insurance specifically covers the risks they are likely to face before going for the cheapest option. Perhaps more worryingly, some insurers will impose stricter conditions on the rules governing claims notification, making it harder to recover funds successfully.

Premiums might be easing now but to ensure that the benefits remain in the long term, risk management procedures need to be better communicated to brokers. Defining what your firm is and isn’t exposed to can improve prospects for a lower premium.

Kevin Culliney, executive director, Howden

Topics