insurance brokers professional indemnity limitsThe changes announced to the Ogden Discount Rate from March 2017 and the subsequent review have been well documented but there is evidence that insurance brokers are perhaps ignoring the effect that this may have on their own business.

The change in March saw potentially huge increases in the cost of awards for personal injury claims and even the new rate adjustment that will come into force after consultation will undoubtedly result in larger settlements.

Whilst the headline effects of these changes, increased awards and therefore increase premiums are understood by most insurance brokers there is evidence that the increased exposure to the broker’s business has not been recognised widely.

Insurance Brokers are required by the Financial Conduct Authority ot carry professional indemnity insurance in respect of their activities with a prescribed minimum limit of indemnity as follows;

(1) for a single claim, €1,120,200 ; and

(2) in aggregate, €1,680,300 or, if higher, 10% of annual income up to £30 million.

These are the minimum requirements and are considered by most prudent brokers to be inadequate in the modern course of business.

For this reason many brokers have previously taken out cover with significantly higher limits in respect of any one claim. How brokers arrive at the figure they wish to carry on their policy is down to the individual firm but is certainly a result of consideration of the type and volume of business they trade in, the claims frequency and severity within the sector and of course cost.

With the changes to the Ogden Discount Rate affecting not only motor insurance but all policies that provide protection to policyholders in respect of their legal liability for personal injury, it is clear that the broker’s own exposure to loss has increased inline with the increase seen with the discount rate change.

Yet many brokers have not yet taken the opportunity to review the limit of indemnity under their professional indemnity insurance policy and whilst it is true that selection of a limit is largely guesswork, however well informed, the potential increases in exposure should be a trigger for most to increase the cover they hold.

David Burton, Managing Director of Blackfriars said;

“We have made adjustments to our own insurance to cater for the increase in exposure following the changes to Ogden and I urge other brokers to carefully consider their exposure going forward”


0161 300 2930 Blackfriars Group