The humble – and somewhat bizarre – genesis of the professional indemnity (PI) insurance industry belies the scope, complexity and society-shaping impact this coverage has had in the last 90 years. Digging into the rich history of the market, Edward Ambrose - UK head of professional indemnity at RSA highlighted that it all began with an (alleged) snail in a bottle of ginger beer in a Paisley café near Glasgow.
The resulting court case went to the House of Lords, he said, which set the global precedent that you do have a duty of care to third parties. The story has proven an effective framing device for the origins and evolution of the PI offering, particularly during RSA’s recent Broker Roadshow tour, which saw experts across the insurer’s professional risks division travel out to six regions of the UK to share insights into what’s happening in the space.
Having served the PI market for 30 of those 90 years in operation, Ambrose knows better than most how subject it is to the winds of change that blow in from every direction – economic, legal, technological, environmental, political and social.
“It has been great to get out into the market and break down the current trends impacting PI, which includes changes to the economy, changes to legal decisions, shifting global dynamics and future trends such as the impact of artificial intelligence in insurance,” he said. “And our brokers seem to have enjoyed it. We’ve had lots of interaction with our Q&A in the end, and hopefully have given the brokers we’ve been talking to things to think about and discuss with their clients.”
Getting out to take the temperature of the market is critical, Ambrose said, because, despite the critical role e-trading has to play, insurance is still fundamentally heavily relationship-based. Having good service, good products and good people is what it takes to create a fit-for-purpose offering – and underpinning that is RSA’s commitment to be out there on the front foot with its broker partners, explaining what it’s doing and why.
To date, the tour has taken the team to Birmingham, Manchester, London, Bristol, Leeds and Glasgow – with other towns being considered for later in the year. Ambrose noted that it has been interesting to see the common themes that have emerged across the regions, as well as where variations have emerged.
“It has been largely PI-related questions,” he said. “There’s a lot of questions about the economy, how we see the competitive nature of the landscape changes, about rates, and about our current and future appetite. The latter is something I talk about a lot because we are looking to grow our appetite along with our growth ambitions.”
Something that often goes under the radar when it comes to PI is its scale, with an estimated 500 different occupation types now purchasing the coverage. In the UK, PI is a circa £3 billion premium industry, with much of that premium made up by the regulatory-driven purchase of PI insurance. This variety of professions and the risks that they face means that the market is subject to rapid changes, he said, creating the need for the constant monitoring and updating of any guidance.
“I’ve been in the market 30 years and I’ve seen two really whopper hard markets in that time, the second of which we’re rapidly exiting now,” he said. “Though that’s not across all areas, there are still concerns for professions involved with construction, there’s still a nervousness about anything to do with fire safety.
“I think that’s likely to remain the case until the report on the tragedy that was Grenfell is finalised, the Building Safety Act 2022 is fully legislated and implemented and finally who bares the cost of cladding remediation work on unsafe buildings is understood and resolved. But even with that, I think there’s more willingness to offer go-forward cover, if not yet legacy work, in that area than there would have been a year ago.”
It’s an established fact that periods of economic volatility bring an uptick in the frequency and severity of claims, he said. With the economic tumult being experienced at the moment, there are a lot of good reasons from a macroeconomic perspective not to aggressively pursue growth in PI. But across the market, there is significant recruitment being made by insurers and MGAs which clearly suggests that there is a lot of capacity and a real return to appetite across the space.
RSA is not immune to that hunger for growth, Ambrose said, but it does take a measured approach to what that growth will look like.
“What we try to do is plan to grow across economic cycles,” he said. “That’s about recognising those different dynamics and trying to have a balanced account of different professions so that if something impacts one at a point in time, that’s counterbalanced by a different profession not going through that cycle at the same point in time.
“We do have an ambition to grow. Our future strategy approach is that this is a £3 billion premium pie, we have a bit at the moment. Which bits do we think we could go back into that we used to write? Or if we’ve never written it, we could consider it for the first time. That’s what we’ve been thinking about for the last nine months or so.”
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