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Spotlight on professional indemnity: SME cover for 2017 and 2018


  • With the General Data Protection Regulation coming into effect on 25 May 2018, insurers must put in place processes to safeguard sensitive information
  • The Grenfell Tower fire has led to a review of building regulations and some insurers have stopped underwriting certain construction-related activities
  • It is estimated that only 10% of SMEs in the UK are currently covered against cyber risks

The competitive insurance market has triggered low premiums for professional indemnity cover but Terry Pegg, director of sales and marketing at Tokio Marine HCC, argues this does not mean that standards in policies or service levels should be slipping.

This year has been another challenging year for the professional indemnity insurance market. The competition in the insurance business sector shows no sign of easing up anytime soon, and the market will continue to see a number of organisations offering PI to the SME sector. Competition ranges from traditional underwriters to managing general agents, from online solutions to schemes, as well as direct markets. As new and modern SMEs evolve in today’s digital world, the way in which insurance is developed and delivered also needs to advance in order to remain relevant, attractive and easy to buy for the new generation.

Customers are what drives the insurance market and in 2018 these new business insurance requirements will start to take even more shape. Professional multi-risk products are starting to appear in the market and brokers are becoming responsive. Clients, especially those in the SME space, do not want to be changing insurers and renewal dates when it comes to placing all their business insurances.

Incoming data regulations

The General Data Protection Regulation comes into effect on  25 May 2018. In line with all other industry sectors, it is certain that the regulation will have a significant impact on the way in which the insurance industry operates and how companies obtain, process and retain personal data. In this respect, ensuring the lawful processing of data will be a challenge across all industry sectors. It is the job of insurance companies to put their relevant processes in place to guarantee the safeguarding of sensitive information.

The challenges facing the construction industry

The terrible fire at Grenfell Tower in June, which saw more than 70 people tragically lose their lives, has led to a major upheaval in the construction industry. While potential issues with cladding have clearly been identified, this matter dramatically affects a number of areas across the construction sector and their support industries, including: building control, fire risk assessors, and architects and engineers. Together with general and more specialist cladding contractors, they have all faced criticism that businesses have been putting profit before safety.

Building regulations are now under review and discussions about non-combustible and/or limited combustibility cladding are under evaluation. There are lots of questions that need to be answered, such as does it matter if a building is above or below 18 metres? The truth is that there are no firm conclusions on such matters. While there are many changes taking place in the industry and lots of unanswered questions, underwriters must maintain a consistent approach to their underwriting. A number of insurers have withdrawn from writing business in this area, but there are many firms that will continue to evolve with whatever the changing requirements may be.

Cyber insurance and the SME market

It is estimated that only 10% of SMEs in the UK are currently covered against cyber risks. This is proving to be a challenging area for many to grasp and understand, it also seems to be taking more time than other lines of insurance to gain traction.

In reality, the risks that SMEs face when it comes to cyber attacks are as real as the risks facing large multinational firms. Unfortunately, smaller businesses do not have the resource and expertise enjoyed by larger organisations. Any business, no matter the size, that holds personal data is potentially in a vulnerable position for cyber crime.

Insurers still need to win the hearts and minds of brokers and clients in understanding the risks involved and taking practical steps in helping manage those risks.

The competitive insurance market has triggered low premiums, but this does not mean that standards in policies or service levels should be slipping. Consistency must be maintained when it comes to underwriting and claims handling.

In 2018, it is likely that the world of insurance will continue to shape and adapt to the changing needs of clients. The SME market will increasingly grow, with more niche insurance product offerings being made available, and it is likely that SME firms may start to use online facilities and app-based services more regularly for securing their insurance products.

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