This report provides the findings from our thematic review into general insurance intermediaries’ professional indemnity. The review was performed to evaluate the individual policies purchased by a sample of firms to assess whether they complied with the requirements in our Handbook.
This project was undertaken to assess the extent to which a sample of 200 general insurance intermediaries met the requirements of MIPRU[2]. We had seen some isolated issues in the course of our reactive supervisory work and had not previously performed any detailed review work in this area.
As such, we wanted to establish the extent to which a sample of intermediaries were complying with these requirements. We also wanted to assess the breadth of the market and availability of cover, considering both what policy limits firms are able to purchase and the extent to which they are able to obtain cover for all the activities they carry out.
Who this applies to
This report applies to all general insurance intermediaries as purchasers of professional indemnity insurance (PII). It also applies to those specialist intermediaries which place the PII of other firms. It also applies to insurers and managing general agents which provide PII products and underwrite this class
Key findings
The thematic review indicates that there is sufficient breadth within the market to provide choice. In fact, we found that the market for general insurance PII was even wider than market participants thought.
We found that firms were able to obtain cover for high limits of indemnity. In a small number of cases firms did not have the minimum level of cover required by our Handbook or had a policy excess greater than that permitted.
We found that policies contained exclusion clauses which gave us significant concerns as their effect could be to reduce the scope of the cover below that required by MIPRU. The four types of exclusion clause were: Suitability of insurer (11 policies), Unrated insurers (two policies), Non-admitted insurers (13 policies), and Insurer insolvency (140 policies).
We also found a high level of inaccuracies in policies, especially around the scope of cover for Financial Ombudsman awards and for any appointed representative a firm might have.
Next steps
Where we have seen clear examples of non-compliance with our rules – such as inadequate policy limits or exclusions which exclude all activity – we have raised this with the firms and ensured corrective action is taken. We will also provide brief feedback to those firms within the review where we have concerns about inaccuracies or inadvertent gaps in their policies.
We will engage with the sector through the relevant trade bodies to ensure that the issues emerging from the review are properly understood. This includes our concerns about the exclusion clauses we found in some policies.
We expect general insurance intermediaries that were not included in the review to review their PII policies to ensure that they meet MIPRU requirements.
We also expect insurers and managing general agents that provide PII in this area to review their products in light of the findings in this report to ensure they are consistent with the needs of those intermediaries to whom they are providing cover – including meeting the requirement of MIPRU.