In recent times, Inperio have seen an increased number of PII enquiries for general insurance intermediaries in which the broker presenting the risk has explained that they are sourcing options for the firm, both with and without a pandemic exclusion. Now my strict interpretation of the FCA’s guidance and my basic knowledge of PROD and ICOBS is that this isn’t really an acceptable trade-off.

It’s not difficult to comprehend that maintaining cover for losses relating to the pandemic could result in higher premiums, however if maintaining cover in this respect is something that a regulated business is required to do, then is it really an acceptable solution to purchase less cover than you require to protect your business and your customers? Should you incur these costs and accept that economic downturn has resulted in a higher cost of trading? As an insurance broker, it’s not just your job to sell cover that meets the needs and demands of your customers, it’s your profession, and therefore why not in respect to your own business?

For years insurance intermediaries have enjoyed a highly competitive marketplace when it comes to their choice of insurance, in fact so much so that firms have been easily and affordably been able to purchase well beyond the minimum PII requirements established by the regulator. Consider when looking at MIPRU 3.2.7 Minimum limits of indemnity, that 1) many firms are still purchasing limits which are unencumbered by an aggregate limit of indemnity, when just about every other professional class now has such a limitation, and 2) they are still able to continue to purchase well above the nominal amounts described in this chapter of the handbook. If unaggregated limits of indemnity are not a requirement of the regulator then why wouldn’t a firm consider an aggregate limit of indemnity in favour of giving up cover essential for emerging business risks associated with the Covid-19 pandemic? What is the purpose of buying such a limit when the basic cover afforded by your policy doesn’t cover your business for what many of your customers would consider to be one of the biggest threats to their business in decades. Shouldn’t your PII at all times reflect the potential for exposures relating to your customers business?

When thinking about those insurance products most adversely affected by premium increases over the past 18 months, insurance intermediary professionals are by no means the most adversely impacted by rate increases. From my discussions with brokers in respect of their clients, there remains a good level of competition in the market for General Insurance Brokers and Mortgage Intermediaries and a good level of cover to meet the regulators requirements, albeit levels can vary depending on which insurers are approached.

The issue of PII exclusions pertaining to the Covid-19 pandemic was first flagged in September 2020 by the FCA. A year later there appears to have been very little change from product manufacturers and distributors, and ultimately whilst there is choice out there for those buyers who want to ensure compliance with their regulators guidance, there is still a lot of buying behaviour to the contrary.


Tim Little

1 October 2021