Professional liability report 2023: trends and future risks

Generally, UK insurers report low professional indemnity (PI) claims levels in the first six months of 2023, compared to notifications for the same period in 2022.

Introduction

An increase in claims is expected in the next 12 months, due to the state of the UK economy, as well as the ongoing impact of global geo-political events including Brexit, COVID-19, the Ukraine crisis and climate change.

Increased reliance on technology, especially AI, has been successful in maximising efficiencies and reducing costs for professional firms, but cyber-attacks and data breaches remain areas of high risk exposure for firms and their insurers.

Key trends

In this report, we take stock of 2023 PI claims trends, consider regulatory developments impacting professionals and predict areas of risk for the next six months and beyond.

Our key predictions for the market include:

Pension issues for finance professionals

By April 2023, the aggregate surplus of the UK’s defined benefit pension market was £378.6 billion. Companies are looking to the bulk annuity market to guarantee the benefits promised to members through insurance, offloading their defined benefit pension liabilities (and the assets backing them) to insurers for a one-off premium. Claimants will be considering claims against advice received on the accounting impact of pension risk transfers, valuation and transfer of assets and exit funding amongst other things.

Lenders claims

For valuers and solicitors operating in the property space, the ongoing Ukraine conflict combined with Brexit, the COVID-19 pandemic, relentlessly high inflation and the cost of living crisis, which has sparked fears of a property market crash, is likely to lead to a resurgence in lender claims.

The Consumer Duty

The Consumer Duty, coming into force on 31 July, will have a significant impact on brokers (and financial advisers). , We anticipate that claims against brokers (for example) will fall into the typical pattern of failing to act with reasonable care and skill (with reference to the Duty) on the basis that, by virtue of the broker’s negligence, a good outcome was not achieved for the customer.