How to give yourself the best chance of a good PII deal

  • Explain the key ingredients for a good PII deal
  • Understand how to prepare your business for a good PII deal
  • Communicate ways to reduce risk in your business
  • Explain the key ingredients for a good PII deal
  • Understand how to prepare your business for a good PII deal
  • Communicate ways to reduce risk in your business
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CPD
Approx.30min
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CPD
Approx.30min
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CPD
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How to give yourself the best chance of a good PII deal
(Chris Ratcliffe/Bloomberg)

Professional indemnity insurance is liability insurance that covers businesses when a third party, for example a client, makes a claim for financial loss, usually due to alleged professional negligence.

Many businesses regulated by the Financial Conduct Authority, including personal investment companies and mortgage and insurance intermediaries, must hold certain minimum amounts of FCA-compliant PII cover. 

Even where there is no explicit regulatory obligation to have PII cover, any business providing advice or services to third parties should consider taking out appropriate PII. PII is an important risk management tool.

Russell Facer, CEO of Threesixty Services

 

We often hear from underwriters that they will use [the quality of the application] as a benchmark as to the level of care and attention a firm may apply to its own records or the client experience.

 

 

Do what is best for your business

The cost and availability of PII can vary greatly but fundamentally it depends on the insurer's view of your risk to them and their reward (your premium) for insuring you.  

Focusing on how you can reduce the risks in your business will improve the view the insurer will have of you.

Hence, it is best not to think about ‘what can be done to secure the best PI deal’, but instead, ‘what is best for your business’. 

The insurer’s overall appetite will be affected by market conditions but focus on controlling what you can influence.

Avoid nasty surprises

Making sure that your clients understand what is to be expected from your services and any recommended solutions reduces the chances of the unexpected happening.

Surprises are a common precursor to complaints. Good practices to avoid surprises include:

  1. Having a clear business plan;
  2. Knowing who your target clients are, and having appropriate services designed for them;
  3. When using a third-party's technology, products or services, ensure you undertake enough due diligence to understand the potential risks associated with each solution; and
  4. Consider what your client’s journey may look like. Could it be bumpy? If so it is vital your client understands that this may be the case, so if there are bumps in the road, your client is not surprised when they happen.

Cash flow modelling is one method of being able to demonstrate that you have considered a client’s future financial situation.

Modelling 'what if' scenarios can help you and your client assess what to do if something should happen.

No models are perfect but bumps are expected. Having a plan reduces chances of claims for surprises.

Due diligence on recommended solutions helps you understand and explain the potential outcomes to clients.

Cash flow modelling tools can also help you understand your client’s likely behaviours, and how they may react to a negative situation.

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