Aon’s Katy Kelly and Emma Southwood answer questions on how to complete your professional indemnity insurance proposal – or renewal – form; why it’s important and the common mistakes they see.
Few businesses – from SMEs to larger organisations – relish the task of completing an insurance proposal form for their professional indemnity (PI) cover and see it as an administrative hurdle that should be jumped as quickly as possible. But there are many reasons why spending a little more time on this important stage of the insurance process can pay dividends in the longer term.
What’s the point of the PI proposal form?
Used at renewal or for an initial application, it’s a critical part of ensuring your business secures competitive PI cover that’s right for you. All the
information asked for in this document is used by insurance underwriters to help them assess the risk your business represents. It captures basic details like company name, address, business activity, and staff numbers, qualifications and experience, as well as more specific financial information related to turnover.
It’s important that the form is completed as comprehensively as possible. This document is the main source of information an insurer will use to understand whether they can offer cover, on what terms and at what cost. The more they are comfortable with the risk, the more likely they are to offer favourable terms, and the quicker the coverage can be issued.
The insurance market is seeing a general increase in rates and insurers are being selective in areas like PI, so it helps to present your risk in the best possible way.
What mistakes do we commonly see?
The most obvious mistake is not answering all the questions. Leaving sections blank or using minimal information will only lead to delays and could create a less favourable impression of your risk to the insurer, which might mean they decline the risk or increase the premium charged.
We often see the work split requested – where insurers ask for you to estimate what % of your business time is spent on different activities e.g. an accountant would estimate the split between activities like payroll, audits, book keeping, M&A – not add up to 100%. Or, the ‘other’ box is ticked and we have to go back to the business to give more detail on what ‘other’ represents.
I’ve had a previous claim, do I declare it?
Yes. Even if a possible claim was notified but not paid out, it’s important that it’s declared on the proposal form. If a successful claim was made, it’s helpful to provide as much detail in terms
of what the claim involved, when it happened, and how much was paid. Insurers will be looking for evidence that the circumstances that led
to the claim have been addressed to prevent it from happening again. The key message is, if in doubt, disclose it.
When should I be thinking about my PI renewal?
It’s important to begin the process at least eight weeks before your renewal and, in this challenging market, we would advise pushing that out to ten weeks. This gives plenty of time for your broker to work with insurers to find the best cover and work through any potential issues without the risk of cover lapsing. It doesn’t project a good image to the insurer if a proposal is presented at the last minute and could lead them to simply decline or impose a higher premium.
The process isn’t transactional. It’s also a chance for us, as a broker, to help you assess aspects like the level of cover you’re buying. You might have taken on some new, bigger contracts for example that could mean your liability has increased and you need higher PI cover. Or, it could be that your regulatory body is expecting your business to have more cover than previously. It shouldn’t be a case of simply assuming your PI is reviewed on the same basis every year.
In short, start early, answer all the questions and include as much information as you can. If you need help, talk to your broker. For further information on the issues covered by this article call 0370 218 8797 or click here to visit our website.
Whilst care has been taken in the production of this article and the information contained within it has been obtained from sources that Aon UK Limited believes to be reliable, Aon UK Limited does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the article or any part of it and can accept no liability for any loss incurred in any way whatsoever by any person who may rely on it. In any case any recipient shall be entirely responsible for the use to which it puts this article.
This article has been compiled using information available to us up to 15/01/21.
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