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alliedib
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Hi Scott,

Certainly true that the online systems that are used for people to quickly obtain cover for Professional Indemnity, however there are a number of pitfalls in doing it this way. Professional Indemnity is a specialised beast with a number of nuances to normal insurance policies, including:
– Claims Made v Claims Occurrence Wordings;
– Costs Inclusive v Costs Exclusive Excesses;
– Jurisdictional Limits;
– Territorial Limits;
– Retroactive Dates; and
– Continuous Cover provisions.
I generally suggest that if a prospective PI buyer doesn’t understand any of the above (and how they would either impact cover or claim) they should talk to an insurance professional – go to the NIBA (National Insurance Brokers Association) website or there would be any number available locally through the yellowpages / google etc.

My 2c from 15+ years in the insurance industry and from the last 2 running my own brokerage (as a soloist) – the downfall for the public in using an online system (for any insurance but especially for PI) is that you are basically taking all the risk into your own hands – if any part of your business activity does not fall within the ‘box’ then there is a chance there is no cover (I am dealing with a client at the moment who is a management accountant but also has a food blog – if she has a claim against her blog and this activity isn’t disclosed then the insurer has all right to decline the claim for non disclosure). Futhermore, the lack of paperwork (by buying online) also means there is a tendency to ‘read over’ questions without taking into account the full ramifications of the answers. I have seen time and time again examples of people stating ‘I didn’t understand what I answered’ – the online process removes any chance for a chat and explanation of the questions which, in the event of a claim, could be crucial in deciding whether it is paid or not.

Also, people need to be careful where they see insurance brokers offering quick and easy solutions such as this – usually (and certainly in the example you have given) these products are offered under a ‘binder’ – the broker is acting as the agent of the insurer and not on behalf of the client (this is an important differentiation). Basically they have told an insurer that they will place a bulk amount of business with them, then left it up to the buyer to determine exactly what they are covering – the broker has no responsibility to the client (at law) which is the opposite to most transactions that are placed through brokers.

I am not saying that there is not a place in the market for these type of operations – people that are just buying to get a piece of paper (and I have come across a lot of these) or those with very simple requirements may just be happy to use them for their cheap and easy nature – I am just noting that it does transfer a lot of the risk back to the buyer. I use internal insurer platforms a lot for my PI placements, but I invariably have a proposal signed and submitted to the insurer and any unusual terms clarified for the benefit of my client. And my experience is that the additional work upfront certain mitigates any possible issues down the track.

Happy to clarify anything above – I find knowledge is power so anything I can do to make the insurance buying process easier I am happy to share.

Regards,

Mark