Hold your network up to scrutiny on PII cover

This article first appeared in Professional Adviser.

In the current climate, PII renewal can be an anxious affair. In this blog I discuss increasing excesses, costs for network firms and if things aren’t working out if it is time to reassess membership…

It is becoming apparent that to keep costs down, some networks have altered what level of cover they have, with excesses, in particular, said to be on the rise.

It was recently professional indemnity insurance (PII) renewal time for the subsidiaries within the Beaufort Group. Never the most joyous of tasks, we are grateful that our premiums were broadly flat year on year.

Crucially, we also maintained our excesses, something we know from speaking to peers is not the case for many businesses.

We are now all familiar with the issues facing the PII market at large. Following a huge contraction in the number of insurers operating within it, some firms that are already insured are struggling to change insurers, and the best an adviser business can often do is hope that its existing insurer will renew.

Five years ago, a typical excess would have been £2,500 to £5,000 per case. Now, £25,000 excesses are not uncommon, and they can be higher.

This latest round of PII renewals comes at a delicate time for the economy, and insurers are clearly concerned about the long-term impacts of Covid-19 on the UK economy.

That is their business, and they have to offer rates they believe reflect the current environment, but these higher rates have to be paid by someone, and if you are a member of a network, it is often you bearing that cost.

Digging into this, it is becoming apparent that to keep costs down, some networks have altered what level of cover they have, with excesses, in particular, said to be on the rise.

Whether or not this has been communicated fully depends on which network you belong to, if you are not directly authorised, but it is nonetheless worth enquiring as, just with any form of insurance, the additional costs individual IFA firms may need to pay could well have climbed.

What can you do about it?

If you discover that your excess has indeed gone up, or there have been any other changes to the way the network’s cover impacts your business, there are a few options.

Firstly, it is important to get a clear grasp of what has changed. Be sure to speak with your network and get a clear answer about PII cover, and any other areas you are unsure of. Be clear about how your liabilities have changed.

What will the future hold? Advisers deserve to know how their chosen network’s systems and controls will help their business weather any storms, so ask about what steps your network has taken to stay close to their insurer, as well as about specific policy terms and premiums.

Finally, there is always the nuclear option; leaving the network. It can feel like there is never a good time to look at exiting, and the expected hassle of doing so makes many firms shy away from it and stay put. However, if you are ultimately unhappy with how your network operates with regard to your PII liabilities, then leaving might be the only option.

If this is you, then before you start the exiting process, understand the terms under which you will be able to leave.

This starts with reading the contract (something too many advisers fail to do); look out for excessive notice periods, the retention of fees and other onerous exit terms. Sometimes what seems like a minor condition is the one that causes the most pain. Something innocuous like the necessity to check a number of files before exit can scupper any plans if it takes months to have those checks carried out.

Due diligence should be broad. Get reassurance that the network has the capacity to process any exit efficiently to avoid you being held in limbo, and be specific on times. If possible, speaking to firms who have left the network can really help to understand and prepare for the exit experience.

Whether you thrive in a network or not is largely down to two factors: whether your business ethos aligns with your network’s own, and if your network put your needs first. If you have any doubts about either of these, it might be time to change.

It’s no mean feat to find the right setup, and unfortunately, the reality is the wrong network can set your business back, rather than help it to grow and develop.

The insurance it offers you is but one of many factors to consider. However, it is a core one, and the only way to make sure you are getting what you need is to hold your network up to scrutiny.