New Guide to Obtaining Professional Indemnity Insurance

THE SCOTTISH Construction Industry Coronavirus (CICV) Forum has issued a new guide to professional indemnity insurance (PI).

The downloadable guide, outlines the state of the insurance market, the precautions firms should take and the pitfalls they face.

It warns that over the last 18 months the cost of PI insurance has hugely increased while businesses have often seen reductions in the scope of their cover.

The free guide offers advice on extending liability to contractual liability, the nature of PI insurance cover, insurance limits, obligations under ancillary documents and risk management.

Professional Indemnity Insurance Guide

Alan Wilson, CICV Forum Chair, said: “PI insurance is a necessary tool for protecting business owners who provide a service or give advice if a client claims a service is inadequate.

“Until the past few years, the construction insurance market has been soft, in that there has been plenty of capacity leading to broad coverage and premium reductions driven by competing insurers.

“The market has now become very hard with the consequence that premium rates have increased, cover has been restricted and, indeed, several insurers have left the market altogether.”

The guide explains that market attitudes have changed for several reasons, including:

• A review of unprofitable insurance classes by Lloyds of London
• Advances in the size and complexity of the design and construction process
• Over-eating, or businesses taking on higher levels of risk
• The effects of the Grenfell tragedy, and
• A series of natural disasters globally.

Len Bunton, co-Chair of the Forum’s Pipeline and Commercial Sub-Group, said: “The issue of PI insurance appears to be a potentially massive problem for the industry. This guide outlines the nature and likelihood of liability and looks at how businesses can manage their risks by identifying them, evaluating their impact and taking steps to control them.

“It offers advice on negotiating with insurers and stresses that full disclosure of risk is vital, despite the onus placed on underwriters by the Insurance Act of 2015 to ask the relevant questions of a business.

“Demonstrating that you have a solid risk management culture, robust financial resources and controls, as well as providing insurers with proof and documentation of risk mitigation, internal practices, cashflow and profit margins, will all help lower premiums.”

Formed in March 2020, the Forum is made up of 29 trade associations, professional services bodies and companies.

Since its inception, it has maintained a steady supply of information and practical advice to the sector as well as carrying out surveys, hosting webinars and holding regular discussions with the Scottish Government.

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