What do changes in the professional indemnity (PI) insurance market mean for members?

Hard market

A hard market is categorised by limited capacity. Insurers have less desire to grow and will evaluate their books of business, appetite for risk and presence in the marketplace. Supply falls short of demand pushing premiums up – and businesses taking out insurance are often subject to stricter standards or policy terms.

Soft market

A soft market is categorised by capacity being easily obtainable, meaning an increase in insurers’ appetites to provide quotations for your business. Insurers may try to increase their market share by adopting an aggressive pricing approach and offering enhanced policy cover. Supply outweighs demand, driving premiums down and resulting in a buyer’s market.

Having entered a hard market in 2020, we are now beginning to see an increase in competition between PI insurers. This has improved capacity and suppressed price increases, resulting in softer market conditions.

How has the hard market impacted ICAEW members?

One of the benefits of being an ICAEW member is access to the exclusive members’ PI insurance scheme. The scheme operates as a separate market or risk pool, providing members with a level of insulation from market cycles and price volatility. Those members who are insured under the scheme generally will not have suffered the price increases experienced in the open market. That’s because insurers need to negotiate any rate increases with ICAEW and our appointed broker, Marsh Commercial, first. The scheme provides strength in numbers and a critical mass that achieves negotiating powers with the insurers. In addition, members have continued to enjoy the same cover levels, excesses and policy enhancements that they are used to.

Members who buy PI insurance off-scheme in the open market may have found it more challenging to find suitable cover in recent years. With tighter underwriting conditions, insurers may have asked more questions during policy inception and renewal, and even implemented policy restrictions or exclusions. Typical changes include:

• Limiting cover to an aggregate amount, meaning policy limits are for all claims made within the policy period instead of any one claim.
• Higher excesses.
• Excluding consequential or economic losses.
• Removing some policy extensions previously enjoyed.

The open market has experienced price volatility over the last few years. Members may have found themselves paying a lot more for adequate or even reduced PI insurance cover.

What opportunities does the soft market bring?

The good news for members insured off-scheme is that softer market conditions bring some of the benefits of a buyer’s market. So, 2024 is a great time to review your PI insurance, get a better price and obtain comprehensive cover without any of the restrictions that may have been imposed over recent years. It’s important to work with a specialist PI insurance broker to get favourable pricing and terms. PI insurers are displaying a positive appetite, including the insurer of the members’ PI scheme – QBE.

The easiest way to get a quote for your PI insurance under the members’ scheme is to contact the team at Marsh Commercial on 03458 944684 or complete an online form and they’ll call you. You can also read their latest article about how to get value for money on your PI insurance.

For members already insured under the PI insurance scheme, there is less urgency to review your cover – as the scheme has protected you from many of the effects of the hard market. No doubt, this year will be a busy one for insurance brokers – so ensure you engage with your broker at least 6 weeks before your renewal to allow them to complete everything on time. Read more about the benefits you enjoy being part of the ICAEW PI scheme here.