Calling something a ‘tick-box exercise’ generally deems it to be trivial or certainly an easy task to complete.
For many years, the mortgage industry has raged against those lenders who operated ‘tick-box’ underwriting and it was partly this lack of attention to detail which could be said to have contributed to the poor business written pre-Credit Crunch.
However, we’ll all be acutely aware that, despite ‘tick-boxes’ being designed to be easily completed, and something advisers will encounter every single day, we are not immune from getting it wrong, and that can certainly have negative repercussions when it comes to securing professional indemnity insurance (PII) cover.
As anyone involved in the advice world will know, PII can be a constant source of worry and frustration, and those active in equity release have not been immune from this in recent years. In fact, you would argue that we have been impacted more than most.
The lead up to securing PII renewal is often a stressful time, not least as a number of insurers have either moved away from the sector, or significantly upped premiums – I’ve seen examples of renewal premiums being 100% more than the previous year – or putting in a variety of new clauses, policies and increased excesses.
Again, just recently, an insurer said they would not cover advisory firms who advised customers who were raising money to purchase second properties. Work that one out if you will.
We know securing PII remains difficult, but we have tried to present solutions that have I know helped many firms get the cover they want and need. Firms can of course do a lot to help themselves here.
One of the key areas I want to stress is around preparation and diligence. If you know that renewal is coming up, then begin to prepare now for what is going to be required in order to secure that renewal.
We, and the Equity Release Council, have done a lot of work with the insurer, UK Global, and while they can of course offer PII cover, what they are also willing and able to do is chat to a firm prior to renewal, and provide professional counsel on what their current situation is, what it might look like, and how the firm can best prepare themselves for it.
There is likely to be a lot of paperwork involved in this, and indeed the whole situation will be more involved from the insurers point of view. Firms, we know, are being asked for far greater levels of information than ever before about the way they work and what they have in place to deal with all manner of occurrences.
Hence, insurers are currently asking firms to show them their plans for putting in place the Consumer Duty rules. And they are being asked for the firm’s vulnerability strategy and policies. Key areas that equity release advisers will need to be on top of in general, but also in terms of securing that PII cover, because there’s absolutely no doubting that the more you prepare in advance for the renewal, the better cover you will be able to secure.
And the other point – and here we are back to those tick boxes – is around diligence in terms of applying for cover/renewal. We had a meeting with insurers recently and I was told that firms’ cover is being impacted if they have grammatical errors in their applications or their supporting documents, and if they fail to tick the right boxes on forms, etc.
The assumption is that if the firm is rushing through these applications, or not taking due care and attention with them, then it’s likely they will ‘rush’ their advice or they are not giving the clients the necessary care and attention they should. It is resulting in premiums being raised or cover not being offered at all. It’s easily avoidable and is perhaps something to think about as you’re preparing your renewal cases.
Overall, we all know that securing PII is not a simple tick-box exercise in itself; it hasn’t been for a long time. Being a member of the Council or the Air Academy will also help as it shows a commitment to the sector, and a commitment to improving your firm/advisers and that you take ongoing CPD and lifelong learning seriously.
It may well help in moving the dial premium-wise and, along with the right preparation, the right support, and filling out those forms correctly, should get you, your firm and your clients the cover you need.
Stuart Wilson is CEO at Air Group