(Original article from Insurance Business Magazine)
We’re now several weeks into 2017 and the landscape is starting to form for the year ahead. So what can we expect from the insurance industry this year?
RPC has launched its Annual Insurance Review which it believes has identified the main issues that could impact the market based on its insight. Let’s take a look at the three key trends it has identified.
The rise of new professions and hybrid businesses
A host of emerging professions will require professional indemnity insurance, RPC suggests, meaning that so-called “miscellaneous PI” will become a fast growing class in its own right.
PI, of course, protects businesses in the case that a compensation claim is brought against them by former or existing clients based on negligent advice, with insurance able to cover compensation and legal costs. According to RPC, there are a host of new professions that will need this type of cover including accountants who are now taking on the role of IFAs, robo-advisors, and architects who are starting to provide interior design advice.
“PI providers are catering to a growing client base of new professions and hybrid businesses. In most cases, this means totally new territory,” James Miller, partner and head of insurance and reinsurance at RPC said.
“These businesses are often based on new concepts like app-based advice – and they need PI insurance to match. They do not fit into any pre-existing ‘boxes’ – and this means a lot more care and attention is required on the part of the insurer.
“It also means there is potential for a substantial new revenue stream for insurers who stake out territory in this new market.”
Cyber liability insurance for SMEs
The second trend that the firm identifies is that while many bigger businesses already have cyber liability insurance in place, there will be an increasing need for small and medium enterprises (SMEs) to take similar steps amid a growing risk of data breaches.
“Big businesses are asking their supply chain of SMEs to get this insurance,” continued Miller.
“Cyber security is no longer just a big business concern. Smaller businesses also hold a huge amount of data and customers are increasingly concerned about the effects a data breach could have on them.
“This is a trend likely to grow in 2017.”
FCA’s review of PI for IFAs
The final trend identified by RPC it could be argued is not so much a ‘trend’ as it is an ‘issue’. It has pinpointed the Financial Conduct Authority’s consultation on the funding of the Financial Services Compensation Scheme (FSCS) as crucial as it could mean that liabilities that were normally covered by the FSCS are potentially moved across to PI insurers – possibly leading to a leap in premiums for IFAs.
“IFAs could be very much in the firing line as the FCA looks to balance out FSCS funding,” said Miller.
“One way they may look to do this is by shifting some of the current liabilities of the FSCS onto PI insurers – which will considerably ramp up how much IFAs will be charged for protection.
“There is even the possibility of PI insurance for IFAs shifting more towards the model used for solicitors and accountants, with defined run-off periods and minimum coverage. That is unlikely to be popular in the profession due to the likelihood of increased premiums.”