Q&A: Life in UK PI

Published On : 13 Mar 2024

Having kicked off his insurance career 20 years ago as a reinsurance broker placing treaty and facultative business for African and Asian insurance companies into Lloyd’s, Sachin Gupta made the switch to underwriting in 2006, beginning his career-long passion for professional indemnity (PI) risks.

As head of UK PI for Pen Underwriting, Sachin leads a 21-strong team of dedicated underwriters trading from five different regional hubs. Sitting within the UK Financial Lines & Specialist Liability division, this combines the talents of the large PI team of Manchester Underwriting Management (MUM) and Pen’s own PI specialists to provide a complete solution for brokers.

We caught up with Sachin after last week’s MGAA’s Broker Exchange event to ask about the top topics dominating his conversations with brokers, find out whether different professions are experiencing different market dynamics and what’s new on the PI front in the Pen family for 2024.


When you attended the MGAA’s Broker Exchange, did any themes dominate on the day and which topics are currently shaping your broker conversations on UK PI risks?

Rates are the discussion dominator. These are now reducing in certain areas after three years of hard market. Brokers are feeling the pressure on their renewal retentions and, while lower prices may sound like good news for insurance buyers, the reality is more complicated than that.

In a long-tail class like PI, with policies responding on a claims-made basis, insurance providers obviously need to ensure there is enough in the pot to pay out on those liabilities in the longer term, but the dynamics we are seeing at the moment are driving prices down.

One broker said to me: “Why does the market harden and soften sharply in this way? If insurance companies learn lessons from previous cycles, why do they forget them so easily?” This came from a relatively junior broker, but it is a very good question. Unfortunately, the dynamics at play are complex and competing, often outside the individual provider’s control. Everyone has budgets and targets to fulfil and you cannot stand in isolation or stay immune to the market price.

Is this rate softening sustainable? Won’t the ‘good’ years pay for the ‘bad’?

What you have to understand is that PI is a very specialist class, with long-term liabilities.

There is always a time lag before claims develop and PI is rarely a huge part of an insurance company’s portfolio, so poor performance can also take a while to be felt in those cases.

Therefore, despite three years of a hard market, it is too early to say the PI market has become profitable – especially as it came off the back of a much longer soft market, stretching from 2003/4 to mid-2018. And yet it is attracting new or returning players, which is driving the market down.

The degree of competition we are seeing now feels like the old market habit; new capital coming in with no legacy tail and firmly focused on building a book, or returners with a change of guard lured back in by rosier actuarial calculations. But the underlying issue is the same: in each PI market you have a relatively fixed number of clients paying for cover, rated on turnover. Meaning it is all too easy to make a loss if your pot is not big enough come the development of claims some years hence.

Neither MUM nor Pen are fair weather PI underwriters; we are in it for the long-term and focused on writing sustainable business for our committed capacity partners. For others it’s a class moved into and out of, dependent on rates and return, and PI has long been an area that attracts new entrants or returners when the going looks good after a period of rate hardening.



If you could change one thing about how the PI insurance market currently operates what would it be and why?

A greater focus on claims, and for every client to understand why continuity is key. Which I guess is two things but, as they are interconnected, we’ll call them one.

With the longer tail of PI insurance, it would be great to hear more brokers making recommendations based on claims track record – on team attitude, responsiveness, access to decision makers and efficiency as well as willingness and ability to pay. What we tend to hear instead is a focus solely on policy wordings, technicalities and price.



Is the UK PI market homogenous, or are different professions experiencing different dynamics?

Overall, the construction profession saw the steepest rate increases during the hard market, alongside the excess of loss segment, so that is where we are seeing the most significant drop in rates. While some correction in rate was necessary, we cannot afford these to fall off the cliff and for good reason.

Construction as a whole is facing a range of challenging issues – most notably steeply rising rates of firms becoming insolvent, which inevitably increases exposure on PI. According to the Insolvency Service, construction firms accounted for 18.2% of all insolvencies across England and Wales in the year to December 20231, a 5.1% increase on the same period in 2022 and a 36% increase on the pre-pandemic figure from 2019.

There is also the Building Safety Act 2022, which came into effect in April last year, and which will be fully in force by May this year. Alongside its aims to reduce safety risk related to fire spread and structural failure through greater planning scrutiny, the Act’s creation of new statutory roles during the design and construction of higher risk buildings and increased regulation of professional competence bring new exposure on roles and responsibilities.

From our perspective as PI underwriters, the most notable change is the retrospective extension of liability periods – to 30 years for dwellings completed before 28 June 2022, and 15 years for claims going forwards. Most proposal forms only ask for six years of data, as that was the previous limitation period in most cases.

In this environment, if insurance rates are coming down, then this upward trend in insolvencies and heightened regulation of professional competence are worrying for any PI portfolio that covers construction professionals.

Insolvency rates bring into focus not just construction but other professions too, such as accountants, who tend to face increased allegations particularly from the audit angle when financial pressure builds. This applies to any profession more exposed to claims of incompetence or negligence due to worsening economic or increased regulatory factors.

MUM is well known as a provider of broker PI insurance – where is the market when it comes to brokers’ own cover and what can they do to ensure they get the best cover at the best price?

Some insurers that had pulled out in 2018/19 are now electing to come back in having seen good rates prevailing.

Broker PI is another complex class, however, and as you’d expect I’d advocate continuity of insurance provider all the way. MUM’s capacity comes with paper that has nearly 100 years’ experience of writing the class. We have grown our book with that same capacity provider and together stood behind brokers during the pandemic, when not a single insurer was offering Covid-19 cover on new broker PI business.

A good PI product is not just indemnification in case of a claim, but the quality of risk management and mitigation measures provided as part of the proposition. Training to ensure full awareness and understanding of regulatory responsibilities, ways to improve and document processes and procedures, technical teachings on errors and omissions – it all adds up to being able to demonstrate you’re a quality outfit. And that will be reflected in your premium.

Last July, Pen brought together its UK PI teams of MUM and Pen when it created the new UK Financial Lines & Specialist Liability division. What is the biggest benefit for brokers and their clients?

Our ability to provide the solution they need, whatever the size and type of client, in the way brokers want. In UK PI, MUM and Pen complement each other really well and brokers can choose how we trade and engage with them. For example, MUM PI didn’t have an e-trade platform, so even a £250 case was traded in a traditional manner, while Pen has a really slick digital quote and bind option, perfect for efficiently trading smaller cases. Old school face to face and phone trading remain real routes too.

Equally, MUM binders had a broader appetite, due to specific expertise built up over time with the capacity to write larger, more complex risks using a high degree of in-house underwriting authority.

So brokers get a multifaceted team that can look at smaller SME-style risks as well as help out with larger solutions which need co-insurance, an excess line or a primary line on something tough to place in the market. That includes being able to talk directly with empowered underwriters, to raise questions or seek guidance, whichever route they choose to trade.



Is there anything new for 2024 in Pen and MUM in terms of UK PI – any changes to risk appetite, new professions being explored, enhanced propositions, technology enablement?

Well, in terms of risk appetite or new professions, our UK PI team already pretty much covers everything, offering a complete PI solution for brokers. Everything except IFAs. We also don’t write Solicitors’ PI within our team – but only because we have a separate, dedicated group of specialist underwriters looking after law firms under Paul Crilly.

On the tech-enablement front, Danny Turner’s e-trade team are at the forefront of a digital project for Pen, which is using AI to read proposal forms and generate quotations, and MUM has always been known for niche offerings that offer that bit extra, especially when times are tough for different professions. So expect more of the same on that front.



And, when you are not immersed in insurance, where might we find you?

Listening to Bollywood tunes, playing five-a-side or spending time with my family – not necessarily all at the same time. I love adventurous sports, so top items on my bucket list include taking a motor biking tour around the world, securing my scuba license to dive independently and swimming with sharks in Australia. There is also now a seven-year countdown clock ticking on the ‘before 50’ challenge I set myself of climbing Kilimanjaro…. Watch this space.