Read our tips on managing the renewal process
There are positive signs in the accountancy PII market, with increased competition causing rates to stabilise.
Nevertheless, ongoing economic uncertainty is leaving firms with unwelcome cost-pressures, underlining the need to keep insurance costs to a minimum.
In our last update on the professional indemnity insurance (PII) market, we reported significant rate increases in previous renewal seasons. This was driven primarily by a number of insurers exiting the market, while those that remained focused on correcting their books of business instead of actively pursuing new opportunities.
Underwriters were approaching the market with scrutiny, exercising caution, and undertaking extensive due diligence at renewal, making it challenging for accountancy firms to secure comprehensive coverage. Regulatory reforms, cyber and fraud threats had further brought the profession into the eyeline of insurers. The emphasis fell on firms to demonstrate risk mitigation measures during submission.
Fast-forward to the present, and there is a growing optimism within the market, with stability and confidence returning following a three-year period in which the market hardened at a rate unseen for 20 years. Insurers are once again entering the PII market, including the re-entry of those who had previously left.
Amid this increasingly competitive environment, the majority of firms are seeing rates stabilise, with the exception of those with an adverse claims history, or who carry out higher-risk work, such as audits.
Despite the positives within the PII market, however, many firms continue to face pressures. Inflation, rising interest rates and threats of recession have increased business costs in the past year, forcing companies to focus increasingly on streamlining operations in order to prioritise cash flow.
A tight labour market, combined with underlying wage growth, is exerting further pressure. Personal expenditures have also increased, placing a particular squeeze on smaller firms and sole-trader accountants.
In light of this challenging economic environment, many businesses may want to keep their insurance expenses at bay as a means to offset costs elsewhere. Below are a few tips to bear in mind when it comes to the renewal process, including best-practice for engaging with insurers:
Mark Grinter, account manager, Lockton Companies LLP
If you have any questions about professional indemnity insurance please contact your Lockton Account Manager for further advice or email ACCAaccountants@uk.lockton.com.
Lockton is ACCA’s recommended broker for professional indemnity insurance