PROFESSIONAL INDEMNITY INSURANCE FOR FIRMS RE-ENTERING THE
MORTGAGE VALUATIONS MARKET
For any firm involved in providing mortgage valuations, Professional Indemnity (PI) Insurance will have
been an almost constant worry since 2009.
In summary, the range of insurers prepared to insure firms that were undertaking mortgage valuations
between 2006 and 2010 has narrowed considerably as a result of the high volume of claims that have
arisen. The resulting constriction in insurance capacity has had a marked impact on the cost of PI
insurance with some firms paying in excess of 15% of fee income for PI cover.
It is therefore, unsurprising that firms which withdrew from the provision of mortgage valuations when the
property market crashed in 2007 are reluctant to re-enter the market because of concerns about the cost
of PI cover and the balance of risk versus reward. One would anticipate that similar concerns will be
uppermost in the minds of those firms that have started trading since 2008 and are considering
undertaking mortgage valuations.
With data from HM Revenue and Customs showing residential property transactions in July and August
2014 at their highest level since November 2007, it is clear that there should be strong demand for the
services of the residential valuation surveyor.
So for firms that are considering either re-entering the market or starting to provide mortgage
valuations; will PI cover be available and will it be affordable?
In response to the first question broadly speaking, yes. It may prove difficult to obtain, but PI cover is still
available for the majority of surveying firms including those that have continuously undertaken mortgage
valuations since pre 2007. However, it can be expensive and one could expect an insurance rate of
around 10% for mortgage valuations where exposure pre-dates 2010.
For those firms that ceased undertaking valuations in 2007 and now wish to re-enter the market, PII cover
should be available, however this will be dependent on a number of factors including the firm’s claims
history, the size of the business (smaller businesses are typically harder to find PI cover for than larger
businesses), the lenders the firm is proposing to work for, the firm’s approach to risk management and
perhaps most importantly the appetite of the firm’s lead insurer.
Any decision to move into or re-enter a line of work should always be discussed with your insurance
broker, particularly if that work is deemed high risk, as is the case with valuations for lending. Whilst the
range of insurers available to firms undertaking valuations for lending remains limited, firms that haven’t
undertaken any mortgage valuations for six years that can point to a good claims history (ideally no open
matters relating to valuations for lending and few settled matters) should have a broader range of insurers
available to them than those that have operated consistently in the field since pre-downturn. This is largely
Howden Insurance Brokers Limited 71 Fenchurch Street, London, EC3M 4BS, United Kingdom. www.howdengroup.com A subsidiary of Howden Broking Group Limited, part of the Hyperion
Insurance Group. Howden Insurance Brokers Limited is regulated by the Financial Conduct Authority: firm reference number 312584. Registered in England and Wales under company registration number
203500. Registered office 16 Eastcheap, London, EC3M 1BD.
as a result of the impact of Limitation and the Jackson Reforms which have both had a noticeable impact
on the number of new notifications received relating to pre 2008 instructions.
For those firms that have commenced trading since 2009 and are now considering undertaking valuations
for lending, the process should be even simpler (and lower cost) as insurers will take comfort from the fact
that there is no exposure to the lending, valuation and litigation practices that have defined the post-boom
claims environment. However, insurers will want to confirm that the past liabilities of any Principals of the
business are fully covered under either a run-off policy or the previous employer’s policy. They will also
ask all the usual questions regarding the experience of those who plan to undertake mortgage valuations
and the risk management practices of the firm with some Underwriters actively recognizing that
membership of certain panels will bring with it additional safe guards in terms of managing risk.
The availability of PII cover should not, of course, be the only factor that’s considered when deciding
whether or not to undertake a particularly type of work. For further information on other matters that must
be taken into account please click here to read Howden’s recent article on the matter.
Ultimately, the availability of insurance is to a certain extent defined by the capabilities of your insurance
broker with the results produced by one broker varying greatly from those achieved by another broker.
Where cover is required for higher risk activities, you may find that the expertise of a PI broker that
specializes in the surveying sector pays dividends both at renewal and when it comes to handling
notifications or claims.
Howden have recently launched an exclusive new
Professional Indemnity Insurance product for surveyors. The
product is designed to provide all surveying firms paying over
£10,000 premium, including those businesses that provide
mortgage valuations, with access to competitive premiums
and excess levels. Uniquely the product’s primary £5m of
insurance jointly underwritten by four ‘A’ rated RICS listed
insurers. Sharing the primary layer between insurers
eliminates over reliance on one insurer, spreading the risk
and reducing the chance of insurers declining to provide
renewal terms. To read more, please click here.
CONTACT US
For further information or to
arrange a meeting to discuss your
PI insurance requirements please
contact Howden’s specialist
property and construction team:
020 7133 1505
[email protected]
www.howdengroup.com/surveyors
Howden Insurance Brokers Limited 71 Fenchurch Street, London, EC3M 4BS, United Kingdom. www.howdengroup.com A subsidiary of Howden Broking Group Limited, part of the Hyperion
Insurance Group. Howden Insurance Brokers Limited is regulated by the Financial Conduct Authority: firm reference number 312584. Registered in England and Wales under company registration number
203500. Registered office 16 Eastcheap, London, EC3M 1BD.