5 ways to manage the costs of professional indemnity insurance

As brokers, you are certainly familiar with professional indemnity (PI) insurance and its rising costs. Premiums have begun to climb and it can be an especially costly part of running a business. Insurers often don’t see mortgage brokers as high a risk as general financial advisers, but there are always ways to minimise both this risk and your premiums.

This is important to consider during times of uncertainty, which may lead people to question otherwise good advice.

Control your data

The first step to getting a lower premium for your PI is to manage your data. It’s been said before that data is the ‘oil of the 21st century’ and that still rings true. Your data is your most valuable asset and it needs looking after.

One aspect of managing your data that needs consideration is security. You hold a lot of private information about your clients and ensuring the safety of that data is paramount to building a strong case for your insurance broker.

A second factor to think about is your data utilisation. If your data, both about clients and about the market, is easily kept and understood, you can use this information to make better decisions for your clients. Being able to show this when applying for professional indemnity insurance will show the insurance broker that you manage your business and clients thoughtfully and with care.

Create an audit trail

Although you are likely to have audit trails in place, consciously creating a clear, direct path to access your data is vital. When you apply for PI, you’ll need to have access to a clear and concise record of all of your business activity. 

Are you storing information about your business in a CRM? Do you use dashboards? How is your deal pipeline being managed? You will need to use the tools at your disposal to make finding, accessing, and understanding this information easy, so that the insurance broker will have a solid understanding of your business practices.

Invest in risk management

When mortgage brokers consider their PI needs, it is imperative to remember that an insurer will be looking at overall risk. By investing in your internal risk management processes, you are showing the insurance broker that there are systems in place to minimise this.

In order to show your business as a minimal risk, ensure that you have procedures in place for the management of both governance and security. Make it undeniable that you have acted correctly and in accordance with legal and best-practice measures.

Keep an eye on the market

As you begin looking for your PI insurance coverage, be sure to watch the professional indemnity market. When major events occur, they can cause significant shifts to premiums for PI. If you keep up to date with the latest news, you may be able to see indicators of these changes ahead of the curve.

If you do sense changes coming, it is important to act sooner rather than later in order to make sure you get the best premium. Often, brokers wait until much too close to their renewal dates and end up missing out on possible savings.

Be open and honest

This is the most essential piece of advice for managing your PI costs. Creating a relationship with your insurer based on honesty will treat you well. The more information that they have about how you manage your risks internally, the better the outcome will be.

You can use all of the advice listed in this article, but if your PI insurance broker never hears about it, they won’t be able to include that knowledge in any quotes generated for you. Importantly, you must also share with them any risks that you may have identified. The earlier that you can identify and share these, the easier it becomes to take action and minimise the risk presented.

By using the tips above, you will be able to better reduce the risks in your business and, therefore, decrease the likelihood of incurring a high premium for your professional indemnity insurance. As PI insurance is crucial to your business and will be an ongoing cost, it is imperative that you do all you can to manage those fees.