Major review of real estate Professional Insurance Indemnity launched as premiums soar
19th July 2021
Commercial property news organisation Costar issued a breaking news story this week with the headline: ‘KF Partner Appointed to RICS Review Of ‘One of Biggest Issues’ Facing Chartered Surveyors’. All I can say is: about bloody time. Having been on the receiving end of the PI Insurance cartel this review is long overdue.
The Royal Institution of Chartered Surveyors has launched a review of its professional indemnity insurance (PII) requirements in the UK in the face of a range of increasingly challenging issues for the industry, including soaring premiums during the pandemic and the increased use of exclusions.
Andrew Gooding, a Partner at Knight Frank, has been appointed to lead a review that RICS says has been initiated due to the extremely challenging insurance market that firms are finding themselves in.
In a statement Gooding said:
“Chartered Surveying firms are being affected by a reduction in the supply of PII, significant increases in premiums and increased use of exclusions, particularly around exposures to fire safety. I believe that the lack of adequate, appropriate, and affordable PII availability is one of the biggest issues facing firms of Chartered Surveyors today.
“I know how challenging the insurance market has been for many firms over the last two years, and I recognise the good work RICS has done to date. However, I believe there is a need to undertake a more fundamental review of our insurance arrangements, which I hope will lead to further improvements in the availability of adequate, appropriate and affordable PII.”
It’s all well and good him saying that – we have had no issue or involvement in any fire safety issues – but our premium trebled in March to a hugely disproportionate level and even the RICS partner insurance firm Hiscox declined to quote!
Our broker went to over 40 firms and even with a clean bill of health only a handful were willing to quote for cover. This is going to have the inevitable consequence of driving small firms out of business losing a valuable slice of market knowledge.
For a recent report on how rising premiums are affecting the industry click here.
During the review RICS says it will work with the insurance industry, regulated firms and other stakeholders to develop an “adequate, appropriate and sustainable PII market in the UK”.
It says the review will also focus on:
• Reviewing RICS PII requirements and how RICS can best support the development of adequate, appropriate and sustainable PII market for RICS regulated firms;
• Identifying additional guidance and support that RICS can provide for RICS regulated firms obtaining adequate and appropriate indemnity;
• Understanding what information consumers and clients require to ensure transparency around RICS regulated firms’ indemnification arrangements; and
• Reviewing how RICS collects and uses data to predict emerging trends in the PII market, as well as better assess and articulate the risk profile of the profession.
To support the review, RICS is appointing an independent insurance expert to gather evidence and make recommendations on potential options to improve the insurance market. This information will be used to consult on proposals to the insurance market in the future.
RICS said it has also recognised the importance of the topic across different sized firms and areas of practice and as such has appointed a “diverse working group” to bring experience and challenge to the review from a variety of different perspectives.
Actions speak louder than words, because, to be honest, it never feels like we are supported by the RICS who seem focussed on the large corporate machines.
We know that transparency isn’t one of the RICS’s strongest traits so why not tell us who is on this working group?
Gooding is a Partner at Knight Frank with responsibility for valuation quality assurance and risk management issues. He is the Chairman of the RICS’ Market Liaison Group with professional indemnity insurers and a member of the Commercial Cross Industry Valuation Forum, addressing valuation issues in the secured lending sector. He has also recently participated in RICS’ working group which has reviewed existing guidance on risk, liability and insurance.
Firms like ours employ normal people, we support training and apprentice programmes, we ask for and get very little support from our governing body… so maybe now is the time to change that – but I won’t hold my breath.