50 years ago this month, Neil Armstrong walked on the Moon. Unless you have been living on the Moon, you will know that the Professional Indemnity (PI) market has dramatically changed in the last year or so, leading to the toughest conditions for clients in the last 18 years.
So, what caused this to happen? And what can Miles Smith do to help you?
UK PI has not been a profitable line for business for insurers for many years, although some sectors within it perform better than others.
The focus of attention (and corrective measures) has largely been in the Construction field.
The trend for the changing market began with the tragic events at Grenfell. Cladding contractors (and associated professions such as architects and project managers) suddenly faced huge increases in premiums; higher excesses and narrower cover.
Risks which insurers thought were contingent (because the design element of the risk was subcontracted out) – and thus paid a very nominal rate – proved not to be the case as subcontractors’ own PI did not respond in the way expected; due to non-existence; non-renewal; ceased trading or inadequate Limits and/or cover.
Claimants also used a “scatter gun” approach against all the parties in the construction chain on the basis that one or more of the PI policies would respond, regardless of the individual Firm’s role and responsibility.
But the seismic change in the UK PI market came in the Summer of 2018. Following years of losses, syndicates and insurers finally woke up to the fact that unless they could turnaround their fortunes and write a profitable PI book, they could not continue as they had done before. Consequently, a number of markets withdrew from the sector, leaving those still remaining to take advantage of the much-reduced capacity, with higher prices and reduced cover, followed by some MGA’s losing their capacity providers.
A more disciplined underwriting approach also ensued, with subscription lines becoming the norm, together with a closer examination of an Insured’s risk management procedures.
For many account handlers, more used to PI premiums reducing every year, it came as a culture shock to suddenly being asked to sell a higher premium and harsher terms and conditions generally. Brokers learned very quickly that telling their construction clients that they had had it cheap for years did not really cut much ice in an industry with operates on notoriously thin margins.
Of course, some of us have been here before. We have seen hard markets and soft markets. We know that historically hard markets do not tend to last very long as the higher prices attract new investors. And some underwriters forget (at their peril) that brokers will always remember those insurers who deliberately take advantage of the situation, often with very little logic being applied.
So how can Miles Smith help you?
Our PI team has decades of experience and knows how to trade through the market cycles. We are fortunate to have our own in-house Facilities where we can provide quick solutions for Policy Limits up to £10m for around 70% of all enquiries received. And for those risks which are not suitable for our Facilities, we have full access to the Lloyd’s and London markets to assist with the more difficult to place risk.
And how long will this hard market last? No one knows – but observers believe it will last longer than a typical 12 months cycle; but it will certainly change before we go back to the Moon.
In the meantime, Miles Smith will be here to help; whether it is a simple risk or a more challenging risk – we will help you find the best solution during these difficult times.
Miles Smith’s professional indemnity team can provide cover for almost all classes of profession (other than solicitors and financial advisers).For more information on how we can help you secure more PI business, please visit our website. Or contact Nick Pauley on 020 7977 4911 or via email email@example.com
COMBINED PACKAGE FOR EMPLOYERS’ LIABILITY, PUBLIC/ PRODUCTS/ POLLUTION LIABILITY, CONTRACTORS ‘ALL RISKS’, MATERIAL DAMAGE AND BUSINESS INTERRUPTION WITH ONE INSURER
We are pleased to announce that we have recently launched our tradesman & professionals package on Acturis. This product offers an ETrade solution for tradesman & professionals package risks that have been declined by other panel insurers. We provide a bespoke underwriting solution for high-risk trades and this specialist product is aimed specifically at risks that have been declined for reasons such as:
- Out of appetite
- Policy limit requirements
- Operating in a specialist line of work e.g. working at height or depth
The offering utilises the existing Acturis tradesman open market question set. Miles Smith Ltd will be pre-selected and quotes that fit Miles Smith’s appetite will be returned with a status of Refer Continue. When other markets have declined you will need to generate and complete a short Additional Details form and submit this to Miles Smith electronically, within Acturis, for consideration. Without this additional information we will not be able to consider your quote request. Details of how to generate and submit the form will be contained within both the Rating Notes and Key Information areas of the Acturis quote.
All quotations will be reviewed by Miles Smith’s dedicated tradesman team and returned electronically within Acturis. The product supports new business, MTAs and renewals. It also offers quote and bind and MTA policy documentation production within Acturis for the broker.
The product is available to all Acturis brokers that already have an existing Miles Smith Ltd Terms of Business Agreement. If you would like further details about the product, or to discuss product availability, please contact our Broker Relationship team on 020 7977 4800.
Our Broker Relationship team will be attending BIBA 2019 on Wednesday 15th May and would be delighted to discuss our exciting schemes and facilities with you. Please contact your dedicated Broker Relationship Manager to arrange a meeting.
Miles Smith London Market Broking is one of the largest London Market brokers, with an experienced and driven broking team in the motor fleet and non-motor insurance market. As specialists in schemes and facilities, we place complex and high-risk business that would typically fall outside most insurers’ risk appetite. We place substantial premium into the London market and by using us, you will benefit from the influence that brings.
Below are your Miles Smith dedicated Broker Relationship Managers. Please contact them to confirm your attendance and to arrange a meeting at BIBA 2019.
THANK YOU FOR COMPLETING OUR SURVEY
The team at Miles Smith really appreciate your positive and kind words about what we do. We have identified a couple of areas we can improve and are working hard to rectify these.
To find out more about our schemes and facilities, or how we can help you with your difficult to place risks, please visit our website: www.londonmarketbroking.co.uk or contact your Broker Relationship Manager.
As new business models emerge and the “Gig Economy” takes hold, understanding working relationships and the distinctions between businesses, contractors, workers and employees is becoming increasingly complicated. So, it’s more important than ever for brokers to provide guidance on who does and doesn’t need to be included in wage roll declarations for employers’ liability cover. Getting this wrong could make declarations wildly inaccurate – as a statutory cover insurer would probably have to pay the claim, but if estimates were massively understated and insurers were not clear on who was covered, they could seek to recover the cost from your client.
There have been a number of recent legal cases relating to employment status – Pimlico Plumbers, Uber, Excel, CitySprint and Deliveroo. Individuals in these cases have been fighting to be recognised as workers rather than self-employed contractors. A ‘self-employed contractor’ has fewer rights compared to a worker who has rights to benefits such as minimum pay, paid holidays and sick pay. An employee has further rights relating to wrongful or unfair dismissal. In these cases, with the exception of the Deliveroo case which was settled out of court by the business before it progressed to a full employment tribunal, the plaintiffs were held to be workers and not employees. Deliveroo accepted no liability in the case, so we are likely to see more and more of these cases in the future.
An example of an employee in a UK liability policy would be any person who is:
a) under a contract of service or apprenticeship with the insured;
b) borrowed by or hired to the insured;
c) a labour master or supplied by a labour master;
d) employed by labour only sub-contractors;
f) under a work experience or training scheme;
while working under in connection with the business.
The above wordings or similar versions have been utilised for many years even though more recently homeworkers, outworkers and voluntary helpers have been added. The important point here is that both a standard employee (under a contract of service or apprenticeship) and a self-employed person are both included within the definition. However, there is no insurance definition for “worker”. Under the Employment Rights Act 1996, a ‘worker ‘is defined as:
“An individual who has entered into or works under a contract of employment or any other contract whereby the individual undertakes to do or personally perform any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer”.
In other words, a worker who is doing work under a contract but not for their own client or customer. This would fall under the insurance employee definition above.
From an insurance point of view the real dilemma is whether someone is a labour only subcontractor (LOSC) or bona-fide subcontractor (BSFC). A LOSC is regarded as an employee but a BSFC is not. In addition, there are labourers sourced from labour hire companies to consider. Sometimes it is difficult to differentiate between the three, but it is critically important to be able to do so.
An employers’ liability premium is based on wage roll, which will be the annual amount paid to all those persons that fall within the insurance definition of ‘employee’. Because these employees carry a risk, insurers will want to collect a premium commensurate, so it is vital to know who are LOSCs and include them in the wage roll figure.
In general terms a LOSC merely supplies their own labour whilst a BFSC can supply materials and equipment too and, importantly, have their own insurance. More specifically though it comes down to control. The table below may help:
Labour Only Subcontractor
Labour Agency Contractor
|Remuneration||Weekly or monthly by wages by the employer. This can include overtime and bonuses.||Contracted price for the job||Paid by the agency|
|Materials and equipment||Usually supplied by the employer. (This may include tools too although a LOSC may have his own.)||Usually supplied by the BFSC as part of the contract.||Provided by the hirer|
|Supervision and control||Under the direct supervision of the employer who can dictate how, where and when work is to be done.||Under their own control and supervision.||Under control and supervision of the hirer|
|Working hours||Usually a fixed number||Decide their own hours for the job in hand.||Could be either a fixed number of hours or the required hours for the job in hand|
|Required task||Do it all themselves||Can do it themselves or hire in others to do it at their own expense.||Responsibility of the hirer|
|Own insurance||NO||YES||Contractor may or may not have their own insurance|
|Deficiencies corrected as own expenses and time||Not necessarily||YES||Responsibility of the agency|
|Income consequences for wrong pricing||NO||YES||N/A|
|Work for other parties||Not usually at the same time||YES||Possibly|
|Can employer assign them another task||YES||NO. Would have to renegotiate contract.||Possibly|
As you will no doubt be able to see, this is an increasingly tricky issue to navigate, so as brokers it’s important to ensure you help your clients understand who a “worker” is and who just does work! At Miles Smith, we recommend that in cases where the real status for insurance purposes and potential future liability is unclear the best course of action is to fully disclose to insurers the methods, employment relationship and the relevant contract terms between the parties. This will unequivocally allow insurers to make a specific judgement and ensure that future issues are avoided.
NEW AND IMPROVED!
A HIGHLY COMPETITIVE, ALL-INCLUSIVE TRADESMAN INSURANCE POLICY FROM MILES SMITH. NOW INCORPORATING YOUR CLIENTS’ COMMERCIAL PROPERTY NEEDS
At Miles Smith, we’re all about providing something extra for our brokers. And we think our new tradesman policy does just that. You need only listen to commercial radio to know that there are plenty of insurance companies that provide all manner of tradesman polices. But how many of them package everything up into one comprehensive and highly competitive policy? Not many.
Well, we do. Unlike most other tradesman schemes out there, we bring together employers’ and public liability, contractors “all risks”, plant & tools and commercial property insurance into one scheme. After all, tradesmen are busy people, and they (and you) really don’t want the hassle of buying all the cover separately.
The scheme has been designed to include all major construction classes and cover businesses with a written health and safety policy and formal training plan for employees. Its sweet spot is where the wage roll is less than £1 million or the turnover is less than £2.5 million. But, fear not, if your client’s business exceeds these limits we have other in-house schemes to cater for this.
Our in-house underwriting team boasts a wealth of experience, a dedicated focus to customer service and fast turnaround times when you need them most.
We think it’s the future for tradesman insurance and we’d love to show you why.
For any new enquiries please email firstname.lastname@example.org or call 020 7977 4800