PI Policy Activity To Increase, Says Flaxman

by Stewart Douglas

Story link: PI Policy Activity To Increase, Says Flaxman

The professional indemnity market could be about to experience strong growth off the back of forceably increased premiums in the wake of growing pressures in property markets, according to a leading industry expert today.

Flaxman Partners, a firm of top-flight independent risk consultants have suggested that professional indemnity premiums are likely to increase over the next few months as economic uncertainties could pave the way for heightened legal activity against laywers, accountants and surveyors, particularly in relation to the faltering retail and commercial property markets.

Amongst some of the main drivers behind the predicted increase in premiums is the growing economic uncertainty stemming from the credit crunch atmosphere and a slowdown in worldwide commerce off the back of the sub-prime sector collapse.

As a result, it is predicted that the sheer volume of claims, and indeed the magnitude of claims, against professional indemnity policies is likely to increase dramatically over the next few years as the economy worsens and money becomes more of a tightly contested subject, with commerce turning to recoup losses from professionals.

“Insurers are also seeing more evidence of mortgage fraud, driven particularly by organised crime syndicates, where professional advisers may have been induced to collude in the fraud by inflating values and misleading lenders,” said Roger Flaxman of Flaxman Partners.

“Combined with the prevailing property and financial market conditions, this could see a significant increase in PI insurance premiums together with a tightening of terms and conditions,” he added.

The news, whilst potentially positive for the insurance industry, will in the end up lead to heightened insurance costs for professionals, which is likely to become problematic should the situation continue to worsen, with the potential to heavily impact on profit margins beyond a certain threshhold.