RICS review of Professional Indemnity Insurance requirements in the UK

During the review RICS will work with the insurance industry, regulated firms and other stakeholders to develop an adequate, appropriate and sustainable PII market in the UK. The review will focus on the following areas:

• Reviewing RICS PII requirements and how RICS can best support the development of adequate, appropriate and sustainable PII market for RICS regulated firms;
• Identifying additional guidance and support that RICS can provide for RICS regulated firms obtaining adequate and appropriate indemnity;
• Understanding what information consumers and clients require to ensure transparency around RICS regulated firms’ indemnification arrangements; and
• Reviewing how RICS collects and uses data to predict emerging trends in the PII market, as well as better assess and articulate the risk profile of the profession.

To support this review, RICS is appointing an independent insurance expert to gather evidence and make recommendations on potential options to improve our insurance market. This information will be used to consult on proposals to our insurance market in the future.

Recognising the importance of this topic across different sized firms and areas of practice, a diverse working group has been appointed to bring experience and challenge to the review from a variety of different perspectives.

This an exciting and important working group that I look forward to being involved in and would urge all members to get involved during the engagement and consultation phases of the review.

Update – September 2023

Insurer appetite continues to expand. During the 21-22 policy year, four new insurers successfully applied to become listed and there were no exits. Feedback from brokers is that there is increased capacity and they have started to find that it is easier to place cover. However, there remains significant reluctance to provide fire safety cover and many firms will find that exclusions continue to be placed on their policies.

The previous hardening of the market has taught us that we must always be prepared for changes to insurer appetite and to ensure that RICS firms are supported in the event that they are unable to get cover.

PII therefore remains a key priority for RICS and we continue to progress the proposals from the PII Review.

RICS staff are now taking forward the following proposals:

a. Changes to the Annual Return to provide RICS with better data on firms’ premiums and claims

• Collecting more data will enable RICS to monitor market conditions and emerging trends. It will also mean that RICS can build a strong evidence bank to lobby effectively for intervention where required.
• We are therefore making changes to the annual return for regulated firms in the UK. Changes are expected to be delivered in 2024.

b. Development of an experienced broker list

• RICS has received a number of applications for inclusion on the list of experienced brokers
• The list will be published very soon

c. Scoping and possible delivery of a common proposal form

• Once we have approved the list of experienced brokers, we will work with them to conduct a full feasibility assessment of developing a common proposal form. This would mean that all renewal applications for PII are more standardised and data collected in a common way. There are challenges associated with implementation, however, which centre around intellectual property and different brokers having different specialisms and which will need to be worked through.
• If the feasibility assessment shows that the form is workable, we will work with brokers, insurers and RICS firms to agree the format of the form and ensure that it is suitable for all firm sizes and for different surveying specialisms.
• Implementation of the form (if applicable) is likely to be in 2024.

d. Review of RICS’s minimum policy wording

• RICS’s minimum policy wording is renewed annually. Each year, RICS liaises with insurers to ensure that the cover within the wording is the most comprehensive possible.
• The minimum policy wording will be kept under review. Feedback from insurers and RICS will feed into any changes that are made.
• The consultation for the 2024-25 minimum policy wording will be published in Q4 2023 and RICS encourages responses from RICS firms and the insurance industry on the proposed changes.

e. Continued focus on education and support

• RICS has developed a consumer guide which seeks to educate potential clients on why they should use an RICS regulated firm. This includes a section on professional indemnity insurance which explains the benefits of using a firm with adequate and appropriate indemnity cover.
• RICS has developed a construction-specific appendix to the existing Risk, Liability and Insurance guidance note. To be published shortly.

f. Continued lobbying of Government for intervention where there is a market failure

• RICS has worked extensively with the Department for Levelling Up, Communities and Housing to ensure that the Department is tuned into developments impacting firms across the construction industry. RICS’s influence was a key factor in the launch of the Government-backed indemnity scheme for EWS1 forms. This is a good example of the sort of intervention that is possible in areas where there is a market failure.
• Similarly, RICS has worked with the International Underwriting Association and our listed insurers to ensure that a clause permitting works funded by the Building Safety Fund to be covered is effectively implemented.
• RICS is an active member of the Construction Industry Council PII group and Government-led Market Assurance Group, both of which comprises insurers, industry bodies, and Government representatives and seek to continue to find solutions where firms are unable to get adequate and appropriate cover for construction-related works.

g. Ongoing engagement with members and the insurance industry

• RICS works closely with listed insurers to seek to understand any emerging issues and trends which impact availability and affordability of cover.

We will provide periodic updates on each of these workstreams.