Starting months in advance, demonstrating solid risk management and keeping a detailed complaints registry are among tips for advisers when it comes to obtaining professional indemnity (PI) insurance.
It was becoming more difficult and costly for advisers to obtain insurance as insurers were exiting the PI market with AIG announcing it would exit in September, following earlier exits by Dual Australia, Vero and Axis.
Speaking at a FPA roadshow in Sydney, David Martin, director of professional lines insurance at insurer AB Phillips, suggested tips for how advisers could reduce their risk.
“They don’t want to see a blank complaints registry because they implies you aren’t recording them correctly. They want to see what you are doing with the complaints registry and how you are addressing complaints.
“They want to see a strong investment committee to show you are managing risk well, controlled growth and good operational controls. They will be sceptical if you are growing rapidly.”
Dean Pinto, partner at law firm Wotton and Kearney, said they wanted to see complaints were being dealt with quickly and transparently, including disclosing any past events to the insurer at the outset as this would help at the back end when processing the claim.
“They also want to see regular reporting to the board, you can’t rely on the insurer to carry the risk, you have to show you are nipping any activity in the bud straightaway.”
Finally, Martin recommended firms started the renewal process early in case a claim was declined.
“Start the process really early, underwriters are obligated to give you 14 days notice if they aren’t going to renew and if you find out 14 days before renewal that you haven’t got an underwriter then you probably not going to find one [in that timeframe].
“What you need to be doing is if you’re a mid-sized firm, start the process two months earlier and if you’re a large licensee, then start it three or four months earlier.”