PI Market: Spending Habitson
It is a common misconception that Professional Indemnity insurance can be cancelled and refunded because you are currently not trading, or the project has not yet commenced despite you providing your services at initial stages.
However, Professional Indemnity insurance is generally non-cancellable and non-refundable, and the reason for this is due to the fact that a PI policy is annually renewable and operates on a ‘claims-made’ basis. This means the cover for a claim is determined by whether the policy is in force at the actual time a claim is notified and not whether a policy was in force when the alleged error or omission occurred. This is significantly different from how nearly all other insurances apply.
With PI you will usually need to take out and maintain the policy to ensure that there is continuity of cover. If there is a break in cover and a claim is notified during that break, then your PI insurers will refuse to assist you with that particular claim.
It is therefore essential to see PI insurance as a long-term investment and one which should not be regularly benchmarked in the same way a motor insurance policy can be.
Due to the very way that PI claims can arise, it can be several years on from when you provided the services or completed a project that you receive a notification of a claim, and if you took the business decision to renew with a less adequate policy or delay renewing your PI arrangements altogether at one renewal, then you will be at risk of having to manage the PI claim without the limit of indemnity and support of your insurer behind you.
It is easy for PI insurers to see a lack of continuity in cover as poor risk management. Avoiding any gaps in coverage will build continuity and goodwill with your insurer should the unthinkable happen and a claim is notified. After all, the key to a successful PI insurance placement is a tripartite effort between you, your broker and insurer.
As you can see there are many aspects to consider when securing PI insurance to protect your business far beyond the premium and policy wording. It is important to have expert advice on hand when placing and maintaining cover.
For more information on how Reich can assist you please get in touch today.