16th August 2010
Don't Attempt DIY PI
The role of the Broker is rather more complex than most other professions for the following reasons:-
- The broker gives advice but often does not specifically charge for it.
- The broker acts as a transactional procurer of a commodity, insurance, for which the Insured may not pay directly.
- The broker is often remunerated by the seller of the insurance, the insurer, whereas the broker’s first duty is to his client the buyer.
- The broker can often owe a duty of care to both his client, who is relying on him to procure the right insurance for his needs and to the insurer who may rely upon him for administrative or other functions.
- Brokers who act as holders of underwriting authority for insurers in fact have a conflict of interest although it is a common practice to do so in the broking industry. This inherent conflict can cause brokers to make ill-judged decisions that later become complex features in a PI claim
Professions such as surveying. law and accountancy are simply advisers who are remunerated for their time by their client. They are less vulnerable to conflicts of interest such as brokers are and this makes the law governing their professional advice fairly comparitively forward.
Not so with brokers. The law concerning broker’s duties of care and fiduciary duties are increasingly complex because of the multiple roles as set out above and the introduction of the FSA Principle based regulations that will eventually test the broker’s role ever more stringently.
A specialist skill
PI insurance is a specialist class of business requiring many years of experience to fully understand how it works in practice. Whilst, as a class of business, it is often regarded as a commodity class, the law concerning professional negligence is increasingly complex and policy wordings are regularly, subtly changed to counter balance the risks.
For the reasons set out above insurers look very closely at the activities of the broker and tend to seek to exclude some of the activities they believe present the greatest risk.
Negotiating effective PI policies is a skill. The skill lies in understanding how the policy will respond in the event of a claim. Handling professional negligence claims also requires specialist skills because both market practice and prevailing case law can influence the management of claims.
It is never a good idea for a physician to try to heal himself. So with your PI insurance. Do not assume that you are your own best adviser when it comes to placing your insurance, or more importantly, defending your own claims.
There is always a tendency for a broker to believe that, because he is a broker he can negotiate his own insurance better than a specialist. Experience has proven otherwise on many occasions. Objectivity is essential at these times and this is best supplied by an independent expert.
Only those who deal with such matters day in and day out know how best to deal with them. Seek advice from a specialist. Consult a BIBA Accredited Broker