Professional indemnity claims to rise but optimism remains for now, says lawyer
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There is an expected uptick in claims stemming from professional indemnity insurance, but the market will remain buoyant at least for the medium-term, according to a lawyer.
Professional indemnity insurance is designed to protect professionals such as freelancers and the self-employed if clients claim a service is inadequate.
Simon Konsta, a partner at Clyde & Co, anticipates the frequency and severity of claims will increase in the coming two years as economic conditions start to hit professionals. In addition, he said both cost and wage inflation have a material impact on the volume of claims made.
However, he said insurers report that they are still keen to commit capacity to this market segment and will retain their current levels of appetite or “even increase it in the near future”.
While macroeconomic challenges are naturally of concern for professionals, insurers and brokers, the impact of this distress is likely to be less severe than that experienced during the 2008 global financial crisis, Konsta believes.
“Despite the economic headwinds, rising inflation, and the likelihood that claims will increase, sentiment in the London PI market is optimistic as we head into 2023,” he wrote on Clyde & Co’s website.
But he said insurers’ competition for “good business” will have the effect of dampening rate increases and causing a plateau in a couple of years’ time.
Konsta added insurers are likely to reduce or restrict coverage for some specific perils over the next 12 months, although many will increase their offering of standalone, affirmative coverage.
He said: “This will enable buyers to, by and large, maintain their existing aggregate limits.”
What’s your prediction for 2023?
Professional indemnity insurance is designed to protect professionals such as freelancers and the self-employed if clients claim a service is inadequate.
Simon Konsta, a partner at Clyde & Co, anticipates the frequency and severity of claims will increase in the coming two years as economic conditions start to hit professionals. In addition, he said both cost and wage inflation have a material impact on the volume of claims made.
However, he said insurers report that they are still keen to commit capacity to this market segment and will retain their current levels of appetite or “even increase it in the near future”.
While macroeconomic challenges are naturally of concern for professionals, insurers and brokers, the impact of this distress is likely to be less severe than that experienced during the 2008 global financial crisis, Konsta believes.
“Despite the economic headwinds, rising inflation, and the likelihood that claims will increase, sentiment in the London PI market is optimistic as we head into 2023,” he wrote on Clyde & Co’s website.
But he said insurers’ competition for “good business” will have the effect of dampening rate increases and causing a plateau in a couple of years’ time.
Konsta added insurers are likely to reduce or restrict coverage for some specific perils over the next 12 months, although many will increase their offering of standalone, affirmative coverage.
He said: “This will enable buyers to, by and large, maintain their existing aggregate limits.”
What’s your prediction for 2023?
