Max Carter, CEO of specialist broker New Dawn Risk, gives us his predictions for the professional indemnity market in 2022.
It has been a tough few years for professional indemnity insurance buyers. A long-term trend towards increased personal risk in business environments, combined with the tendency to litigate in the case of perceived malpractice, has created an unstoppable growth in claims that has heavily affected the price of professional indemnity insurance.
Clearly this is not a happy situation for buyers, and it creates an equally challenging environment for the brokers who must source their professional indemnity cover.
While there are many COVID issues still in play around the world, with lockdowns continuing in some countries, the real panic from the virus seems largely to have been absorbed, and this means that we can now begin to look ahead again and consider where the pricing trend in professional indemnity might now move. Rates are not likely to drop in the short term. In this historically underpriced class of business, there is currently still little room for downward movement.
However, there is good news ahead. Fresh capacity is arriving in the market, and this is likely to herald a welcome stabilisation of prices; customers may finally find that they are more able to buy a policy without significant limitations on cover, even if the price remains high. In addition, COVID has had much less impact than insurers and brokers anticipated in the financial and professional space – in comparison to sectors such as hospitality, which have had a horrific couple of years – and conditions are likely to remain broadly stable.
This relief does not apply to every sector, though. There are specific sectors that face their own challenges, and nervousness about these means that their pricing will remain high. Architects, contractors, and surveyors remain exposed to the long-term fallout of the Grenfell fire and, ironically, financial services businesses are also seeing the effect of underwriting uneasiness relating to regulatory and cyber-crime risk.
But what about the long term? Before prices can drop, the market will need to see positive underwriting results flowing through. If things continue to stabilise, I anticipate that 2021’s results could point the way for some insurers to re-enter the market and, as a result, we may at last start to see pricing competition becoming more visible.
Let us hope that, for all those who rely on us to deliver professional indemnity cover, the green shoots of recovery do burgeon into increased capacity, relief on pricing, and a more stable market in 2022 and beyond.