A new report that has just come out from a leading British association for chartered surveyors (the RICS) has highlighted problems caused by a clash between runaway professional indemnity insurance premiums and low valuations fees.
The Insurance Times gave details of the report two days ago. Apparently the problem arises from the fact that while valuation fees have remain ed at a relatively low level, premiums have risen alarmingly as a result of the number of supposed negligence claims and the cost of settling these.
The report highlights the danger of the incompatible gap between valuation fees and premiums by going on to warn that PI insurance may become unviable in the near future except for a very few. Most institutions or individuals wishing to carry out a valuation for secured lending could simply find that it is not insurable.
The report suggests that the easiest way out of the problem is to raise the valuation fees and pass the cost on to clients or reduce the risk factor in contracts.
The basic reason for PI insurance was reiterated in the report, outlining the dangers of not being able to make provisions for it for a whole swathe of businesses. The essential reason for taking put professional indemnity insurance is to protect oneself against a negligence claim is due to something that one is responsible for. The insurance is not limited to providing cover for the owner of the business him or herself but also for the negligence of any employees working for that business.
The report highlights the importance of a fallback situation in case something unexpected happens.
The insurance cover allows the professional or contractor to be able to pursue his or her profession with peace of mind as well as allow the business itself to be able to carry out its business in its own particular sphere.
Professionals who take out professional indemnity insurance may also be interested in taking out bond insurance at the same time. This is a method used when establishing a new contract in which one can guarantee against default by the owner of a contract – the principal.