While professional indemnity insurance rates may have come down considerably for firms below the third tier, those that are involved in the major audits, complex corporate and international work have not enjoyed such fortune.

Whether you can lower your rates depends on the risk profile of the firm in question. David Turner, an executive director at insurance broker Willis, says: ‘With the right risk profile, I believe that if you can demonstrate to underwriters that you have a sound approach to risk management, and your loss history reflects this, premium reductions are achievable.’

Play your cards right

A worthwhile exercise in negotiations with insurance companies is to compile evidence for your case. ‘While it can be time consuming to submit detailed information during renewal discussions, it is worthwhile as it enables your broker to differentiate you from your peers, and often to negotiate a better than average deal. I recently managed to realise a 30% premium reduction for an accountant using this approach. We have relationships with many insurers with an appetite to negotiate a deal,’ says Turner.

It is significant that major new players, such as Zurich, are trying to make their mark on the market. But Gary Head, underwriting director of the professional division at Hiscox Insurance, says: ‘Although there’s a flood of new capital ­ the thought of easy pickings and underwriting profits has led to a market softening by at least 25% over the past two years ­ some have forgotten that this is long-tail business. It’s happened before and moving to save a little bit of money now may not seem so clever in five years when the claims come in.

‘Although this soft market may continue for some time, claims inflation has not stopped. We may already have got to the stage where PI is technically unprofitable. But at the moment there is a lot of choice and accountants can shop around.’

Close the stable door

When it comes to all-important risk management, the insurance industry is looking to accountants who have established a problem handling procedure. This means a defined centre where all problems and complaints are not only registered, but handled and over long periods handled promptly, so they do not fester and pick-up costs.

In many markets, when prices soften buyers will shop around. Insurance brokers are fiercely competitive and are only too happy to try and undercut each other.
Because of the long-tail aspect of PI insurance, however, most accountants will try and stay with the broker and insurer that is familiar with their business.
But as Willis’ David Turner says: ‘They may not be moving, but they expect the broker to do their stuff.’

Michael Snyder, senior partner at mid-tier firm Kingston Smith, says: ‘This is a softening market, but we have not taken a reduction in premium, but an extension of cover. At the top end of the market, because of the range of work, there is not so much movement and although we looked carefully at our insurer last year we didn’t do this. ‘My feeling is that rates will continue to stay rather flat, not least because although the numbers of claims does not go down, there has been no significant increase in the price of settlements.’

Go for broker

It’s not just about how much savings you can make either. Alan Hubbard, head of insurance at Mazars, says: ‘Buying this insurance is not like buying baked beans, having a broker and, more important, an insurer who understands your business is vital.

‘Brokers are always phoning up after your business, but they can never do better than your existing broker. There are only a few underwriters in the market and the brokers all go shopping at the same place.’

But just as accountants with different commercial exposure, risk and claims’ experience will have different PI insurance experience, so will those who are involved with different types of business.

The insurance industry is understandably always most concerned about the last big claim category. Just as, at one time, the misselling of pensions brought out the underwriters’ magnifying glass, so today it is film finance and aggressive tax planning that worry the insurance market.

Underwriters are only too aware that HM Revenue & Custom’s hostile stance, especially in taking a retrogressive approach, could result in a wave of claims and they are looking very carefully at those accountants who have a high profile in these areas.