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A new way of doing PII?

Journalist: Carmen Reichman, FTAdviser

ended 29. June 2024

Dear advisers

Do you think you would benefit from a PII underwriting model that focused more on wider data within your firm, such as your culture, tech processes, client relationships, client centricity - so a closer look at how products are sold as opposed to just which ones and the turnover?

The idea is that you could work with your PI insurer to effectively de-risk your business.

Would the wider market benefit from a shift to such an underwriting model? Would it make the market more accessible and help flatten cycles?

Are insurers already looking at these ideas?

What might it mean for the smallest firms which might not be able to afford the same tech and consultancy services to de-risk their business?
 

All ideas welcome. Thank you!

carmen.reichman@ft.com


 

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Daniel Wiltshire
Actuary & IFA at Wiltshire Wealth
It's clear that PII underwriting lacks sophistication and would benefit from a more wholistic view of the drivers of risk. Culture has a huge influence on adviser behaviour but is difficult to quantify objectively. Charging structures should also be considered as it has the potential to create peverse incentives - particularly big up front fees. If I was an insurer I would also consider rapid growth (either through acquisition or organically) as a red flag.

As for size, in my experience the small firms and one man bands can be client-focused and risk-aware to the point of paranoia. Conversely employed advisers at bigger firms are often under pressure to meet ambitious sales targets but arent' subject to personal liability at an individual level.