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Don't let low rates fool you into complacency

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To businesses that have been hit hard by the spiralling costs of obtaining professional indemnity (PI) cover in recent years, the survey by the Association of British Insurers (ABI), revealing the slowing rise in the cost of liability insurance, is welcome.

According to the ABI, PI premiums rose only 4 per cent last year, compared with the 40 per cent increase seen in 2002.

The insurance industry is entering a 'soft market' - we've seen more insurers offering PI and, on the whole, prices are coming down with increased competition. While this is good news for firms that have long been suffering spiralling costs - and reduced premiums may be more attractive initially - we strongly advise caution.

It is a function of the insurance market that, as it moves from 'hard' to 'soft', insurers attempt to cushion the effect of declining premiums by seeking to limit the cover they provide.

Practices should check that their insurance specifically covers the risks they are likely to face before plumping for the cheapest option. Perhaps more worryingly, some insurers will impose stricter conditions on the rules governing claims notification, making it harder to recover funds successfully.

Premiums might be easing now, but to ensure that the benefits remain in the long term, risk-management procedures need to be communicated better to brokers. Defining what your firm is and isn't exposed to, can improve prospects for a lower premium. The ABI has attributed the slower rate of premium increases to better health-andsafety management by firms.

Can the construction industry be confident that this is the case and not just a consequence of our cyclical market?

Kevin Culliney, executive director, Howden UK

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