COVID-19 – Advice on Home Working Challenges

Many millions of employees are now starting, or have recently started, working from home. This temporary event creates a large number of health and safety questions. Our homes are not always great environments for working in. Many people will not have office-style setups and will have limited space to work in. Dining rooms, kitchen worktops and sofas are not conducive to good posture and comfort. And with young children or dependents, in the home environment, there are huge challenges regarding psycho-social issues and employee welfare. To help, PI Expert has created 8 temporary home worker advice sheets covering the following home working challenges.

You download the advice sheet using the links below, alternatively, you can scroll down to read the same advice on this page.

Working from home, your comfort

Welcome to working from home. You may be a seasoned home-worker or this may be your first time. Either way there are some simple but effective things you can do to keep yourself comfortable, healthy and productive.
Unless you have a dedicated desk and chair setup it can be difficult to achieve a healthy posture. That said, it is possible to work effectively from a couch, dining room table or kitchen counter by following this advice:

  • First, figure out where you are going to work to avoid too many distractions.
  • If possible, try to avoid soft seating. Couches and beds do not support your body well. If you do decide to work from your couch use a small pillow to support your lower back and maintain the natural curve of your spine.
  • Avoid placing your laptop on your lap. This can cause laptop burn on your legs. Use a tray or even a magazine to prevent contact.
  • In an office your chair is positioned so your thighs are horizontal and your feet flat on the floor or footrest. It is unlikely your dining chair or kitchen stool will provide the same support so your pelvis may be tilted while you work. Make sure you stand up regularly and move your body.
  • A couple of ways of doing this is to place your beverage out of reach so you have to move to get it. Stand up while taking a call.
  • Listen to your body! If you become stiff, fidgety or uncomfortable… MOVE! If you experience more frequent discomfort speak with your manager or health and safety colleagues.

Remember, your health and wellbeing is the most important thing for us. This homeworking period is temporary and difficult for all of us, we are here to support you through this challenging period.

Working from home, stretching and energising

You may be a seasoned home-worker or this may be your first time. Either way there are some simple but effective things you can do to keep yourself comfortable, healthy and productive.

Poor posture can cause fatigue which can set in quickly and affect our concentration, productivity and wellbeing. When you work from home there is less need to move. This can affect the oxygen in your soft tissues, cause discomfort and affect everything you do.

Set an alarm on your phone to take a short break every 20-30 minutes. If you are working on a couch, dining room chair or at a kitchen counter you may need to take a shorter break even more frequently. Use your break time well. Below is a list of stretching exercises to help keep you energised. You can also download an App by searching Healthy Working in the Apple and Android stores.

Note: when doing stretching exercises, always stay within your own limits and follow your doctor’s advice.

Forearm stretch down

Hold your right arm out in front of you – hand facing out and your fingers pointing down. With your left hand pull downwards until you feel a stretch along the right forearm and/or wrist. Repeat for the left arm.

Forearm stretch up

Hold your right arm out in front of you – hand facing down. Place your left hand across the palm of your right hand and pull up until you feel a stretch in the forearm and/or wrist. Repeat for the left arm.

Forearm wrist stretch

Place your hands together in a prayer position. Apply gentle pressure allowing your palms to make contact and your wrists to bend back, until you feel a stretch on the back of your forearm.

Rotate fingers

With your right-hand face down on your lap, rotate each finger in turn. Repeat with your left hand.

Wrist forearm stretch

With your arms hanging by your sides, bend one hand back at the wrist. Raise the arm in front of you, hold for a few seconds then slowly drop your arm to your side. Repeat with the other arm.

Wrist stretch

Hold both arms straight out, palms away from you. Bend your hands down until you feel a slight stretch on the back of your wrists. Hold for a few seconds then raise your hands into a flat position.

Arms across chest

Raise your right arm to near shoulder level. Grasp behind the right elbow with your left hand and pull the arm across your chest until you feel a stretch on the back of the right shoulder. Hold for 5 seconds and repeat with the other arm.

Arms behind back

Stand up. Clasp your hands behind your back then push out your chest. Stretch your shoulders backwards, pulling the shoulder blades together to feel a stretch across your upper and lower back.

Ceiling stretch

Stretch your right hand straight up towards the ceiling. Hold for 5 seconds. Lower your arm. Repeat with your left hand.

Lean back

Make sure there is plenty of room behind your chair. Put your hands behind your head and lean back in your chair. DO NOT lean so far back that your chair becomes unstable.

Pull shoulders back

Sitting upright in your chair (so that your back is not touching the back rest), pull your shoulders backwards until you feel a slight stretch across your chest.

Relax back

Move your chair back from your desk. Lean forward, resting your forearms on your knees. Relax for 5-10 seconds before returning to your normal seated position.


Close and open your eyes several times to relax and moisten your eyes.

Look into the distance

Periodically focus on an object that is at least 10′ (3m) away from your desk (as this helps to work the distance muscles of your eyes).

Roll eyes

Roll your eyes several times, looking around the room as you do so.

Head turn

Slowly turn your head to the side until you feel a slight stretch in your neck muscles. Repeat, turning to the other side, remembering to move your neck slowly.

Neck tuck

Drop your head down onto your chest until you feel a slight stretch across the back of your neck. Hold for a few seconds then raise your head.

Sleep well, live and work well

Working from home can be challenging. The commute home from work is usually a great disconnect and gives us the chance to relax and reflect on your day. When working from home it can be difficult to “switch off” as you are living and working in the same space. There are some tips that can help:

  • Finish your work at the same time as you normally would.
  • Pack your work belongings away so you are not tempted to return to work.
  • If you can, do something distracting. For example:
    • Listen to music
    • Go for a walk
    • Video-chat with friends
    • Try some light exercise

Overall, it is important to maintain a daily routine. Make sure you go to bed and get up at the same time.

Working from home, your personal plan

Over the past few days you have received a number of emails with suggestions to keep you safe, well and productive. Here is a brief reminder of the key points:

  • Comfort Remember to listen to your body. If you feel uncomfortable, get up, move and stretch. If you experience pain, please report it to your manager.
  • Communication Don’t forget to stay in touch with your colleagues. If you are feeling isolated, the chances are they are too. Pick up the phone, check in regularly and if you feel like you need support, tell someone. Make sure you are clear about what your manager expects from you.
  • Emergencies Make sure you have a plan in case you fall ill, have an accident or experience a fire. Check your fire alarms, don’t overload plug sockets and carry your phone with you at all times.
  • Equipment Make sure your cabling for your laptop or other work device does not create a tripping hazard. It may sound patronising but we are generally more complacent at home as the environment is familiar to us. This complacency can cause risks we might not foresee.
  • Report it Most important, if you have an issue or anything concerns you, whether it relates to comfort, workload, potential or actual risks, you must report it to your manager or health and safety colleague immediately.

Working from home, medical emergencies

Welcome to working from home. You may be a seasoned home-worker or this may be your first time. Either way there are some simple but effective things you can do to keep yourself comfortable, healthy and productive.

As a homeworker you may be working alone. It is therefore important you have an action plan in case you hurt yourself or become unwell. One of the best things you can do is to carry your mobile phone with you at all times. If you were to fall, you may struggle to get to your phone to summon help.

The severity of your illness or injury will determine whether you phone 111 or 999. Dial 111 for less serious issues or to get advice on whether you need to seek further medical support. 999 should only be used in an emergency situation. Why not download the St. John Ambulance app? This has some great first-aid advice.

If you feel you are at greater risk or have an underlying condition and you need additional support speak with your manager or health and safety colleagues.

Working from home, it’s good to talk

Working from home can feel lonely, especially if you are not used to it. These feeling of loneliness can be compounded if you are self-isolating and avoiding physical contact with family and friends.

In extreme cases of loneliness or feeling of desperation you should reach out to the Samaritans on 116123 or email

There are some brilliant things you can do to help connect with yourself and others. Why not consider:

  • Talk to your Colleagues. Make sure you stay in regular contact with your colleagues. Consider video-conferencing and picking up the phone rather than emailing. Working from home often means you miss out on the office-news, why not set up a short, virtual coffee-meeting with your colleagues so you keep up with what’s going on?
  • Be comfortable about what is being asked of you. It is easy to worry about what others think of you. Some people worry whether their manager is happy with their work or worried they are not working hard enough. If you start to feel concerned pick up the phone and speak with your manager. They are there to help you – after all, the more productive you are, the more productive they are!
  • Exercise! Your mental wellbeing can be improved with exercise. If you can, go for a walk. If you are self-isolating and have a garden take a few minutes to stretch and exercise outside. If not, you can still get a light workout indoors. The NHS has a great guide which be accessed here.
  • Sunlight and fresh air is important too. If you step outside on a sunny day you will get a healthy boost of vitamin D. Use your garden, balcony or even simply open a window!
  • Socialising. Even in times of self-isolation we can still keep in touch with our friends and family. Pick up the phone and use social media platforms. Why not reacquaint yourself with those you have lost touch with?

Loneliness and feelings of isolation are completely normal. Sometimes though these feelings can overwhelm us. Remember there are things you can do and organisations who can help.

Working from home, fire safety

Fire is a risk wherever we work and live. If a fire were to break out do you have a plan to escape?

Tips for avoiding fire in your home:

  • To avoid fire risk, do not overload electrical outlets.
  • Do not place electrical cords under rugs or cover them with other materials.
  • Switch off and unplug your work devices at the end of each day.
  • Check your smoke alarms are working.
  • If you are a smoker, try to avoid smoking in the area you work in.

If a fire breaks out only tackle it if it is small and you are confident you have the means to do it. DO NOT TAKE RISKS, fire can spread quickly and unpredictably. Your best option is to get out or follow the advice you have been given for your building and dial the emergency services.

Plan how you would escape and share this information with everyone else you live with.

Working from home, eat well, feel well

Obviously, working from home is different to working in an office but our behaviours can differ too. A new working structure can introduce habits we do not necessarily want, such as eating too much, too little or eating the wrong types of food.

Here are a few tips to help you to eat well:

  • Try to eat lunch and snacks at the same time as you would in the office. Try to eat the same types of food too.
  • Keep treats out of sight (or out of reach!)
  • Take a break from your working area to eat your lunch. The act of getting up and moving will help you keep focused and energised.
  • If you find yourself snacking too often, try drinking a glass of water instead, it should suppress the feelings of hunger.

Do you feel lethargic? It could be you are so focussed you have simply forgotten to eat. In the office, you have triggers such as colleagues getting up for lunch. Without these triggers, you may simply forget.

Remember, your health and wellbeing is the most important thing to us. This homeworking period is temporary and difficult for all of us, we are here to support you through this challenging period

7 very good reasons for Residents’ Associations to consider Directors &Officers (D&O) insurance

Quite often, people living in a block of flats or along the same street may form a Residents’ Association or Residents’ Management Company. It’s a great idea to promote a sense of community and provide a united voice to deal with issues such as property services and maintenance. Sometimes, legal and financial matters may come under an association’s remit as well and, guess what?…anyone who has taken on a management or administrative role on the committee could end up being personally – yes, personally – liable if something goes wrong.

So the first reason for considering D&O insurance, as a Residents’ Association is simply this – it’s a way to avoid the strife, stress and financial implications for individuals who’ve nobly volunteered to help out on the committee (whether paid or unpaid), if one of the residents decides to sue.

Surely a group of residents will stick together in a crisis? You’d think so, wouldn’t you? Sorry, no, life doesn’t work like that. Here are a few horror stories to make your toes curl:

• Building Insurance blunder
An association secretary chose the building insurance for a block of flats but neglected to read the small print applying to unoccupied flats and a pipe burst in one, damaging the flat below.
The secretary was held personally responsible for failing to obtain adequate cover.

• Filing accounts fiasco
Companies House fined the directors of a Residents’ Management Association because they didn’t file the accounts on time.
D&O cover allowed them the funds to defend themselves.

• Squirrel damage disaster
A squirrel climbed into a building maintenance room via an overhanging tree and chewed up all the wiring. Action against the directors was attempted on the grounds that they had failed to maintain the tree properly!
D&O cover paid the legal costs in the successfully defended case

• Price drop penalty
Members of a Residents’ Association committee were sued because a flat dropped in value when it was to be sold. The resident alleged that the association had failed to manage a disruptive tenant in a neighbouring flat.
Legal costs ran to more than £10,000

• Libellous lapses
In a number of cases, directors have been sued for libel – for example, for writing a letter in response to some allegations against the board, or for claiming a failure to disclose conflicts of interest. The cost of legal advice and representation in these cases can really mount up.
Costs, sometimes as high as £35,000 have been covered by a D&O policy

And the seventh reason to have D&O insurance? You’d be mad not to!

For help and advice on buying the correct Directors and Officers cover call The Expert Insurance Group on 01825 745 410

Rating Downgrade Triggers PII Concerns

Standard and Poor downgraded eight European insurers this week, including Allianz’s Italian operation and Ageas’s Portuguese unit. Whilst these are big name insurers, the operations affected are the overseas companies, rather than the main European arms. The ratings downgrades follow on from the downgrading of the sovereign ratings of 17 Euro zone countries at the end of last week.

However anyone breathing a sigh of relief should think again. The rating agency has yet to decide on the ratings for some of the biggest European insurance groups.

“We have not yet completed our review of the effect of the sovereign actions on Allianz Group, Aviva Group, Axa Group, and CNP Group and have therefore not taken any rating action on these groups” S&P said in a statement.

A downgrade on any of these major insurers will result in significant problems in the market not just for the insurers, but also for brokers who recommend their products.

The insurance industry has long been proud of its gold standard A ratings and this simple measure is used as an indicator by many brokers as to the financial security that the institution presents when recommending products to customers. What is worrying about the current market is the fact that ratings are not, as is traditionally the case, slipping by a small margin, but are in some cases dropping through the floor.

Groupama is a good case in point. Here is an insurer with good reserving practices, a conservative approach to risk and a good record on underwriting, who many brokers would have recommended with confidence in May last year. However the company has seen their ratings tumble in from a healthy A- in May 2011 to BBB- in December 2011.

The problem with the headline grabbing downgrade is that brokers and customers start to get nervous. Groupama are putting up a good case to defend their reputation – they have reminded the market that the UK operation is independently capitalised and ring fenced by the UK regulatory regime with a solvency margin of around 190% and an investment portfolio that is in sterling with no exposure to Euro-debt. So in many ways this is an insurer brokers should still be able to recommend and that customers should have confidence in.

The issue of course is that the insurers have used their A ratings with such success in the past as a benchmark that it is difficult to reverse that mindset. Insurance brokers are conscious that their professional indemnity cover is rated on the amount of business that they place with insurers who do not have an A rating and their customers often demand a rating of A or above to secure contracts with councils, large companies and government bodies.

Groupama is a comparative minnow when looking at the likes of Aviva, AXA and Allianz. If the ratings for these huge insurers are downgraded and they suffer the same loss of confidence from the market then the insurance market will be in for very turbulent times.

All of this presents real challenges for insurance brokers and IFA’s who will need to consider long and hard the financial prospect of the insurers that they recommend if they are to avoid a professional indemnity claim being made against them. Bearing in mind the speed at which ratings have dropped, the recommendations that an broker or IFA makes will need to be well documented and take into account factors which go deeper than the S&P rating which will provide the insurer with the ability to survive a crisis of confidence.

Extradition Nightmare for Website Entrepreneur

Last week a judge ruled that a UK student can be extradited to the US on a charge of copyright infringement. Richard O’Dwyer funded his university education by setting up the website which hosted links to films and TV programmes.

In his defence O’Dwyer has pointed out that the material was hosted on a server based in the UK and did not contain copyright material. Further at no point during his activities did Mr O’Dwyer leave the UK.

The US Immigration and Customs Enforcement agency (ICE) has sought extradition of Mr O’Dwyer on the basis that even if the activity was legal in the UK, .net and .com addresses are routed through American infrastucture based at Verisign in Virginia and the prosecution can therefore be considered under US law.

The case is interesting for UK based web developers, IT consultants and businesses that specialise in the tech industry because it highlights the exposure that these businesses have to actions from around the world, even if the business is very small or does not trade outside of the UK. The nature of the business means that every web site has the potential to reach and breach the laws of countries around the globe. The result is the potential for legal action against both the business and the directors.

Whatever the rights and wrongs of the situation, O’Dwyer has had to face the onerous financial cost of defending himself against the extradition and the cost of appeal. These costs will be irrecoverable even if when the case is eventually heard, he is found to have done nothing wrong. In the event that he is found guilty then not only will he face up to five years in a US gaol, he may also have to pay damages for infringement of copyright.

This case highlights how owners of web sites with open forum discussion groups or income generating possibilities, whether small, huge or not for profit, must consider carefully how to protect themselves and why all Tech businesses, whether family run or Limited, should buy good quality insurance protection to pay the cost of defending this type of action.

There are two relevant types of insurance cover which are essential – Professional Indemnity and Directors and Officers cover.
Professional Indemnity Insurance (PII) for tech professions will provide cover for defending claims for inadvertent copyright infringement and will also cover the cost of damages which arise from such actions. The cover will be subject to a pre agreed limit and an excess, however if you buy a good quality insurance policy then the defence costs will normally be covered without excess or limit.

PII cover for tech professions needs to be on a geographical and territorial limit basis of Worldwide (including USA and Canada) for it to provide adequate protection.

Professional Indemnity cover will not provide insurance to pay for the cost of defending the extradition hearings or appeals. However a good quality Directors and Officers policy will provide this cover. A Directors and Officers policy is normally bought by Limited Companies or Clubs, Societies or Associations, however they can be adapted to suit sole traders to provide protection against the risks faced by individuals.

For further information about Professional Indemnity Insurance for IT professionals and Directors and Officers Insurance please call PI Expert on 01825 745 410

ABS and ATE – Regulation and PII Insurance

Much has been written in recent months about the changes in how solicitor practices conduct business. The so called Tesco laws which allow non lawyers to own a solicitors practice came into force on the 3rd January 2012 and Alternative Business Structures (ABS) became a reality.
Ironically, despite five years of free advertising, Tesco’s have so far declined to take part in the party.

In fact there has been little interest so far in forming ABS’s – the Solicitors Regulatory Authority reported “more than 10 applications” had been received by close of play on the first day. With an ABS licence predicted to take up to nine months to secure, it seems unlikely that ABS will have an immediate impact on the legal market. However the scene is set for the corporate money to move in and this will inevitably be a game changer.

The Jackson reforms are the other wind of change that’s blowing through the legal services market. The Government seems set on banning payment and receipt of referral fees by solicitors and insurers by amending the Legal Aid, Sentencing and Punishment of Offenders Bill. Legal firms who rely on referral sources to generate their case load need to start planning now or these reforms will seriously affect the flow of business. Referral agents and After the Event Insurers (ATE) will also considering their future.

Inevitably the interested parties will find a work around whereby work and money continues to flow to legal firms, referral agents and insurers. This might result in the formation of ABS companies where the business owners are drawn from the three affected business sectors and possibly incorporating financial advisors to mop up commission due on investments that are made on larger compensation or court of protection settlements.

Whatever the reason for setting up an ABS, the parties need to be aware that of how the new ABS’s will be regulated in respect of the sales of general insurance and investment business. Currently any legal firm that undertakes this work or derives income from the sales of these products is covered from a regulatory point of view by the Law Society. However the Law Society has said that they will not be responsible for these companies and therefore any ABS which wishes to profit from this type of income will need to seek authorisation from the FSA. (click here to view FSA Policy Statement) An application to the FSA for authorisation will further complicate and prolong the time that it takes for an ABS to be in a position to begin trading.

From a professional indemnity insurance point of view the ABS will still need to buy cover from the approved SRA insurers, however it will be important to ensure that the policy also covers professional indemnity risks arising from the fees generated by any work that is regulated by the Financial Services Authority.

Alternative Business Structure who need advice on Professional Indemnity Insurance can call PI Expert for help and advice. PI Expert specialises in Professional Indemnity for ABS firms and Solicitor practices.

Professional Indemnity Insurers Brace for Downgrade Impact

The news that the Ratings Agency Standard and Poor is considering downgrading the credit rating of a number of European Insurers will strike fear into the heart of the Insurance Industry in the UK and the Professional Indemnity Insurers that underwrite General Brokers and Independent Financial Advisor’s.

The underwriters under threat of a ratings down grade include household names such as Aviva, Allianz, Axa and Generali. RSA Ireland is also on the credit watch list. If the downgrade goes ahead they will join the recently downgraded Groupama, a well regarded medium sized insurer who has already seen their credit rating downgraded as a result of their exposure to Government securities.

The problem facing insurers is that to maintain their credit ratings, they have placed their funds in what has traditionally been considered as safe investments. The current economic crisis has changed the face of safe investments – investments in financial institutions, banks and government securities have been undermined, maybe irretrievably. Reinforcing this view, Standard and Poor have stated that the review of the insurers ratings will be based on their review of the Eurozone member governments.

It follows that if there is a downgrade in the credit rating of the government underwriting the securities then the insurers investing in them will also suffer a downgrade in their credit rating. S&P have stated that the rating review could see some insurers long term ratings lowered by as much as two notches.

The effect of Government Debt on the profitability of insurers is illustrated very well by the recent results published by Allianz. In November this year the firm announced a fall in third quarter profits of 80%, largely due to losses on Greek debt. To put this in perspective the German Insurer made profits of just 258m euros in the three month period, down from 1.27bn a year ago.

The Greek debt is the tip of the Iceberg, and exposure to Government debt in Italy, Spain and Portugal has yet to really play a part in insurers results. If S&P carry out their threat to down grade Germany, the Netherlands, Finland, Luxembourg and Austria by one notch and France by two, this will have a significant effect on insurers and could put pressure on solvency margins, leading to possible insurer failures.

For Insurance brokers and IFA’s these potential downgrades are significant cause for concern. The British Insurance Brokers Association recommends that members place cover where possible with A Rated insurers. As a rule of thumb to recommend an unrated insurer or one with a lower rating must be justifiable if a professional indemnity claim is to be avoided. Circumstances where this might be appropriate would include risks where no alternative insurer is available for example some solicitors Professional Indemnity or Surveyors PI cases or those where the only affordable insurance cover is unrated or low rated.

The fifteen firms affected by the S&P credit watch negative ratings warning involves some heavy hitters within the Insurance Industry and will make recommending insurance cover more challenging over the coming months. Brokers will have to consider how the Euro crisis could affect the rating of insurers over the period of the policy. Now, more than ever, it will be important for brokers to document the consideration that they have given to the financial security aspect of an insurer when making their recommendation – a factor which many brokers would not have even thought to question with the likes of Axa, Aviva or Allianz in the past.

IFA’s will need to be extra careful too- some of the insurers affected have a big exposure on the UK Life and pensions side as well as on the general market – Aviva, AXA and Generali are all major providers of Life Investment and Pension products to UK consumers.

Many Professional Indemnity Insurers look to see each year what the exposure is to unrated and lower rated providers as a rating factor when setting premiums. A broker or IFA who has made sensibly based recommendations during the year to what appeared to be strong financial institutions, could find that as a result of an insurer down grade, unforeseeable even three months ago, they have a portfolio of higher risk policies. This will affect Professional Indemnity Premiums.

The decisions take this weekend by the Eurozone leaders may well be a step in the right direction to strengthening the Euro and thus avoiding a crisis, however the will to push this through will need to be considerable and PI Expert is not convinced that this exists in either the politicians or the populations of the member states in the Eurozone.

For incisive help, advice and quotations on Professional Indemnity Insurance for Insurance Brokers and Independent Financial Advisors please call PI Expert on 01825 745 410

Avoid a claim – Top Tips from PI Expert!

1. Know what your professional duties and legal responsibilities are at all times

2. Be conscious of what could cause a professional indemnity claim – remember if a complaint escalates and becomes a PII claim and insurers might consider that the compliant was the notifiable circumstance. This might invalidate your cover if you have note reported the circumstances quickly enough to your insurers – this can be as little as within 14 days.

3. Keep complete and accurate written records of all of the advice that you give as well as any recommendations or communications you have with your clients. Don’t forget to keep telephone notes.

4. Know when to ask. We don’t all know everything – recognise what you do and don’t know and when you should ask for help or guidance form peers, associates or a governing body.

5. Never assume that your client knows or is aware of something that appears to be obvious to you. Not everyone is as insightful as you are.

6. Never send a written communication without double and triple checking it.

7. Never put anything in writing that you would not want read out in public or in court.

8. If you don’t know for certain say so don’t wing it or make things up just to get a sale.

9. If you are worried you might be about to get a claim call your PI broker immediately – far better to check now than be sorry later.

10. Buy your Professional Indemnity Insurance form an expert, not a call centre. If you need to claim you will want someone on hand to help you who you can rely on and to be sure that your Professional Indemnity policy gives you the best protection available.

PI Insurance – Falling Ratings Cause Concern

The current economic gloom creates an interesting environment for insurers. It is unusual for UK insurers to fail and this is largely due to the solvency margins that have been enforced by Government and the FSA over a period of years. This means that the UK is very safe place for people to insure their business and property.

One of the problems that the industry will face over the coming months will however be one of stability. The investments that insurers have used to maintain solvency levels have traditionally been regarded as very safe vehicles. However as he financial crisis has begun to bite one of the interesting features has been that these traditional safe investments have come under attack and this is having an effect on how they are rated by rating agencies.

Evidence of an insurer’s financial rating is key components that brokers should use in assessing and recommending cover. An insurance broker has a duty of care to their clients in selecting and recommending an insurer. In most cases brokers will look for what an insurer who has an A credit rating.

In recent times there has been an abundance of such companies to choose from, however if the current package of measures that have been put forward to save the Euro are unsuccessful, then a situation could arise whereby the gold plated A rating becomes much more elusive and exclusive. This could present an issue for brokers as the absence of a credit rating could leave them vulnerable to allegations of a breach of duty of care.

Like most brokers PI Expert has a policy wherever possible of recommending A Rated insurers. This is an essential not just for our client’s peace of mind and the professionalism that we bring to the deal, but also for our own Professional Indemnity cover.

Increasingly Professional indemnity Insurers who cover general insurance brokers are asking about the security of the markets used when granting cover and this is something that brokers will need to bear in mind over the coming months and years as the marketplace becomes more turbulent.

FSA Proposes PII Public Policy Disaster

In their response to the Joint Committee on the draft Financial Services Bill the Financial Services Authority (FSA) used the justification of “Public Policy” to call for changes to the law to remove the direct link that exists in law between causation and compensation.

PI Expert believes that this argument is fatally flawed. It is our view that altering the laws of natural justice in the way suggested by the FSA will directly result in the public being less well protected than as is the case under the current regime. To suggest otherwise implies a failure on the part of the regulator to understand the very mechanisms that are in place to protect customers.

The effect of the FSA’s proposals will result in advisors being required to compensate not only for the affects of inappropriate or bad advice, but also in cases where the advice that they have given is correct, but during the course of the advice being given an FSA rule, however minor, has been broken. This might include for example failure to record the issue of a key facts document or Initial Disclosure Document.

The net result will be an increase in the amount of compensation paid, and when claims farmers get wind of a no fault compensation scheme, a steep increase in the level of spurious claims.

Of course it is not the Advisor who pays these claims, but their Professional Indemnity (PI) insurers. The bottom line therefore is that it is the PI insurance cover, not the rules and regulations put in place by the regulator, which underpins and provides financial security to consumers

The PII market for Advisors is currently in a good position. General brokers are not seen as a high risk and pay relatively low premiums. Mortgage Advisors saw some upward pressure on premiums during the early days of the economic crisis, but largely this situation has now stabilised. IFAS’s have experienced issues arising out of pensions, endowments and market specifics such as Key Data and similar market issues, although rated more highly than other types of advisors, are still able to buy PII cover at relatively reasonable premiums.

There is a good range of well resourced, reputable, A rated insurers who are prepared to underwrite the advisors PI market. This is a significant benefit to the consumer and, indirectly, to the Financial Services Compensation Service.

Rating of PII is largely controlled by the level of claims. Advisors who regularly give bad advice receive more claims than those who provide good advice. Advisors with poor claims histories pay higher premiums or struggle to find insurers prepared to cover them. As evidence of PII cover is a requirement for continued authorisation this rating process forms a natural barrier to trade for advisors that give poor advice and in itself provides a method by which the industry silently polices and removes bad firms.

The proposals made by the FSA would have the effect of removing this self regulation process.
The moment that the law requires firms to pay 100% compensation when they have not caused or contributed to a loss the differentiation in PII claims patterns between good and bad firms will be lost. If claims go up then premiums go up. If claims go up exponentially, and underwriters can’t make a profit, then insurers will start withdrawing from the market. And if Insurers withdraw from the market or advisor can no longer afford to pay premiums then the mechanism that protects customers (PII) is fatally undermined.

This is a scenario which has already played out across two other professional sectors – Solicitors and, to a lesser extent, Surveyors. For both of these sectors there is a limited and decreasing market of A rated insurers who are prepared to underwrite to the stringent requirements of the regulatory body.

The Solicitors PII market provides an unpleasant vision of how the insurance advisors PII market could look if the FSA proposals on causation and compensation are accepted. Over the years the number of insurers prepared to underwrite solicitors business has dwindled to just 19. Premiums have sky rocketed.

There are still A rated insurers on the SRA approved list, including Allianz, Liberty and Travellers, however many of the A raters are refusing new business or have priced themselves out of the market for existing clients. Chartis, who were the largest solicitors PI insurer in 2010, withdrew from writing new business for Solicitors PII in 2011 and actively worked to reduce their exposure for existing policyholders. The emerging theme in the solicitors PI market has been the entrance of a number of foreign unrated insurers – Alpha (Denmark), European Risk Insurance Company (Iceland) and Enterprise (Gibraltar).

The Solicitors Regulation Authority states clearly that it does not regulate, vet or approve insurers on the list. The SRA famously gave Quinn access to market shortly before the company suffered a solvency crisis. To be fair to all concerned at the point of authorisation Quinn did carry a credit rating, but it fell short of the gold plated A that most brokers look for when placing business.

Evidence of an insurer’s financial rating is key component in placing cover. The financial security offered by unrated foreign insurers may be better than some of the UK markets, however in the wake of the Quinn fallout Steve White, Head of compliance and training at the British Insurance Brokers’ Association commented in an interview with Insurance Age

“Brokers have a duty of obligation and care. While the broker is not the guarantor of the insurer, the law does expect the broker to exercise due care in selecting an insurer and brokers should be mindful of that when making their selection. One of the factors that a broker can take into consideration is the credit rating. Though there may be other considerations, the absence of a credit rating could leave a broker vulnerable to allegations of a breach of duty of care.”

If the Insurance Advisors PII market followed the same course as the Solicitors PII market, as well it might if the FSA’s request is enacted into law, the industry could well see a deterioration in the financial rating of its own insurance carriers. This would be a disaster for the industry as a whole and for consumers in particular.

PI Expert hopes that the regulator will reconsider this ill conceived suggestion. For our part Brokers and Advisors must make our voice heard in this important debate.

PI Expert – Independent, Authoritative, Incisive Professional Indemnity Advice for the Financial Industry For help and advice call us on 01825 745410.

FSA Proposal To Penalise Brokers and IFA’s

There has been a mixture of good and bad news recently for Brokers from the Financial Services Authority (FSA). On the one hand is the welcome news that the FSA it is to restart its funding review of the Financial Services Compensation Scheme (FSCS). On the other is the alarming news that the FSA is seeking to impose absolute liability on brokers and IFA’s to provide compensation to customers for losses that were not caused by the firm’s faulty advice.

This latest wheeze by the FSA goes against the natural laws of justice, and will impose a huge financial burden on the industry as Professional Indemnity Premiums will have to rise to meet the increased levels of awards for non fault compensation.

The proposal by the FSA seems to have slipped in without the implications being picked up by the industry. The FSA’s alarming request formed part of their response to the joint committee on the draft financial services bill. In their memo the FSA stated:
“Our experience is that members of the public and Parliamentarians have been of the view that – as a matter of public policy – the breach of the FSA’s rules should in all cases entail the consumer receiving 100 per cent redress.”

PI Expert agrees that any breach of the rules that results in a clear loss for a consumer should result in compensation to the customer, but we take issue with the suggestion that this should result in compensation being paid where there is no link between the customer’s loss and the advice provided.
The FSA’s went on to say:
“However, the FCA’s ability to ensure that consumers receive redress is constrained by the general law, in particular by questions of causation. If the breach of rules either did not cause the loss, or was merely a contributory factor, the FCA will not be able to require firms to pay full redress.”

“If society expects as a matter of public policy that the regulator should be in a position to require greater levels of redress to be paid then the FCA needs to be given a clear mandate and powers to do so in the new legislation. This is a difficult issue that gives rise to real questions as to how far the regulator’s powers should extend and we would very much welcome the Committee debating this matter, in particular to achieve further clarity as to the FCA’s mandate in this area.”

This statement should be sending shivers of fear down the spine of the industry. If adopted, this change will alter the current legal position whereby a firm is only liable to compensate customers in respect of losses which stem directly from the advice that they have provided.

If the FSA gets its way the law will instead provide the FSA with the dispensation to totally disregard the principles of causation. Firms could find that a small technical breach in for example providing documentation such as failing to provide a demands and needs statement could result in a firm being required to compensate a customer for a loss that has arisen for a totally different reason that is unrelated to the advice provided by the firm.

The FSA has said that the proposal to the committee is a suggestion for consideration and is not a firm FSA policy, however there is a real danger that this proposal could get through by default if the industry lets it slip through without protest or comment.

PI Expert cannot see how the FSA proposal can have any benefit to the industry or indeed customers. Of course the FSA would be a net beneficiary of such a draconian change as it would significantly reduce the time and level of expertise needed to investigate complaints. If a customer only needs to provide a minor breach of rules to achieve full compensation a less through investigation will required which could be undertaken by less well qualified staff. This would give the FSA, who are under huge pressure at present due to the large number of payment protection claims, a huge saving in terms of time and staffing costs.

If the FSA’s real motive is to reduce their admin costs then this could end up being a method of getting brokers to foot the bill of the banking sectors miss selling of PPI and Creditor Insurance by the backdoor. However the long term affects of such a major alteration to the laws of natural justice would be far reaching.

The net result of a change of this magnitude can only be that Insurance Intermediaries will end up paying a huge cost in compensation payouts and this will have the knock on effect of increasing PII premiums, potentially to the type of levels that have been seen in the surveyors and solicitors markets where in many cases firms have had to fold due to the unaffordable cost of obtaining PII cover.

If passed into law, the proposed change will open the door to greedy lawyers and claims farmers who will be rubbing their hands with glee at the prospect of such easy pickings. PI Expert questions how the FSA can believe that it is in the public interest to legislate for a firm to take responsibility for any loss that does not arise from their own actions.

There is no justification for this proposal. It negates the principle of indemnity that underpins the insurance industry and imposes an unfair burden on advisors across the entire financial sector. We must not let this slip into law by inertia.

PI Expert – Independent, Authoritative, Incisive Professional Indemnity Advice for the Financial Industry For help and advice call us on 01825 745410.