How to give yourself the best chance of getting a good PII deal

Professional liability insurance is liability insurance that covers businesses when a third party, such as a customer, makes a claim for financial loss, usually due to alleged professional negligence.

Many companies regulated by the Financial Conduct Authority, including personal investment firms and mortgage and insurance intermediaries, are required to hold certain minimum amounts of FCA-compliant PII cover.

Even where there is no explicit regulatory requirement to have PII coverage, any business providing advice or services to third parties should consider taking out appropriate PII. PIIs are an important risk management tool.

Russell Facer, CEO of Threesixty Services

Do what’s best for your business

The cost and availability of PII can vary widely, but fundamentally it depends on the insurer’s view of your risk to them and their reward (your premium) for insuring you.

By focusing on how you can reduce risk in your business, you will improve the image that the insurer will have of you.

Therefore, it’s best not to think about “what can be done to get the best IP deal”, but rather about “what’s best for your business”.

The insurer’s overall appetite will be affected by market conditions, but focus on controlling what you can influence.

Avoid unpleasant surprises

Ensuring your customers understand what is expected of your services and any recommended solutions reduces the risk of the unexpected.

Surprises are a common precursor to complaints. Best practices for avoiding surprises include:

  1. Have a clear business plan;
  2. Know who your target customers areand having appropriate services designed for them;
  3. When using third party technology, products or services, make sure you do enough due diligence understand the potential risks associated with each solution; and
  4. Think about what your customer journey might look like. Could it be bumpy? If so, it’s essential that your customer understands that this can be the case, so if there are bumps in the road, your customer isn’t surprised when they happen.

Cash flow modeling is one method of demonstrating that you have considered a customer’s future financial condition.

Modeling “what if” scenarios can help you and your client assess what to do if something were to happen.

No model is perfect, but bumps are expected. Having a plan reduces the risk of surprise claims.

Due diligence on recommended solutions helps you understand and explain potential results to customers.

Cash flow modeling tools can also help you understand your customer’s likely behaviors and how they may react to a negative situation.

Understanding their individual attitude, capacity and risk tolerance, and presenting them with specific recommendations, greatly reduces surprises for everyone.

Avoiding a claim is better than having to defend one. However, if a claim comes up, you should be in a better position to defend the recommendation.

Have a standardized approach and use technology

A standard, process-oriented approach can help reduce human error.

Using technology can be helpful, especially for repetitive tasks. For example, the Money Alive software solution is a good example of providing an engaging and repeatable explanation of defined benefit risks, providing a consistent approach for advisors and clients.

Learn from one’s mistakes

A well-managed complaint can lead to a satisfied customer and improvements in a company’s procedures, making them more robust for the future.

File reviews can provide similar results in a less painful way. Using client file reviews as a positive means of identifying individual training or process improvement needs offers more value than considering them for purely individual suitability assessments.

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