What can go wrong?

Against a background of increasing regulation and compliance, the competitive nature of the UK insurance market and high client expectations, it’s no wonder mistakes are made. Most of them don’t matter and are easily rectified but unfortunately some do and they can have a real impact on relationships with clients and insurers and cause long-term damage to professional reputations. Moreover, insurers’ margins are under more pressure than ever before with the market so competitive that broker error is often a reason given not to indemnify.

Things like:

• Failure to arrange or renew appropriate insurances
• Failure to explain the implications of exclusions and warranties
• Failure to communicate insurer requirements (e.g. risk management improvements)
• Failure to disclose material information to insurers

Fortunately, insurance brokers know better than most how important the right insurance protection is.

Cover considerations

The Financial Conduct Authority requires insurance brokers to hold professional indemnity insurance, stipulating minimum cover requirements. In practice, many brokers will require limits well in excess of these minimums.

Insurance broker wordings are usually written on a full civil liability wording tailored to reflect the specific exposures of that business.

What are insurers looking for?

Insurers want to know about the range of insurances offered, highest and average sums insured, any specialisms and the qualifications and experience of individuals advising clients. Scheme arrangements will need to be disclosed especially where there is authority to bind or renew policies in-house.

Insurers want to see evidence of good risk management, particularly in terms of staff supervision, consistent written records of client interactions, diary procedures and leadership in regulatory and compliance issues – as evidenced by a good claims experience.

Any in-house financial services exposure (past or present) will require completion of a Financial Services Questionnaire.