Steve Swyny, Commercial Director at F4B Network
PI, DA’s and the rising costs conundrum
When assembling and delivering a comprehensive network offering its vital to tap into areas where you can add real value. Now this seems like common-sense but you’d be surprised how many new businesses get so fixated on their own ideas, concepts and vision that they fail to appreciate the real wants and needs of their customer base.
I may well be showing my age a little here but I vividly remember the fanfare which preceded the launch of the Sinclair C5 in the mid 80’s. And how quickly this became something of a laughingstock. For those that haven’t heard of it simply Google it and thank me later. This concept highlighted how something which was marketed as an alternative to a car, motorbike or bicycle ended up falling somewhere in between. Ultimately, it ended up appealing to nobody and was widely recognised as one of the great marketing bombs of post war British industry.
I’m sure there are many other similar failings over the years but for some reason, maybe because of my engineering background, this really sticks in my memory. This little trip down memory lane has made me digress a little, but my point remains about the importance of giving people what they want and – from feedback from potential and existing advisers within the network – one of the most appealing features across our offering has been our comprehensive PI cover.
Any company that has had a recent renewal will know that PI premiums have increased in recent times. To put this into some perspective, a report from Money Marketing late last year highlighted that professional indemnity insurance premiums for pension firms with defined benefit permissions have increased by 20 per cent annually since 2017. In addition, the Law Society reported premium increases of 5-50% as ‘typical’, at a point when firm turnover is down 10% on average.
PI premiums have increased significantly over the past two to three years due to rising claims experienced by some insurers following major events such as the Grenfell tragedy, the fire at Bolton University and the collapse of Carillion. This left insurers to pay the hefty price tag of more claims with a limited financial supply. As a result, the PI market has lost half a dozen insurers in the past year.
With a number of advisers and firms leaving the market, run off insurance has also had an impact on escalating premiums. Run off cover insures against claims of professional negligence and it is particularly important for retired business owners to consider; without run off cover in place, how they would fund the defence of a claim.
New providers are just starting to appear; however, this remains an area of concern for intermediary firms of all sizes. And it’s not just rising PI costs which directly authorised (DA) advisers need to consider. I say this after recently speaking to a DA who is currently paying over £1,000 per month for his PI, FCA/FSCS fees and compliance costs, and that’s before they have written any business.
These growing costs are a huge concern for the DA market and its little wonder that so many are turning to robust network offerings for answers. And it’s now up to networks to really step up to the plate and deliver the types of service, solutions and value which can make a real impact on their business.