Insurance brokers are cautiously optimistic that the professional indemnity market will finally reach its nadir over the next 12 months and start to soften mid-to-late 2021, providing much-needed relief to advisers and licensees paying a minimum of $10,000 per head for annual premiums.

There are no guarantees, however, with the market still well short on suppliers. Insurers are reluctant to take on extra risk when the pandemic is decimating the economy, experts say, and while AFSL holders are under heightened pressure from the corporate regulator.

“It’s the hardest I’ve seen it in 20 years,” says GSAIB manager of professional risk, Ryan Neary.

Neary points to the withdrawal of insurers in the market as being behind the PI insurance malaise, as well as the Hayne royal commission which has inhibited insurers from taking on advisers.

“Insurers just seem to be writing checks in this case and that’s why premiums have increased so much,” Neary says.

GSAIB’s Ryan Neary

The pandemic has taken a hard market and made it harder, explains Robert Huntley from Everest Risk Group. “Obviously Covid-19 has made the insurers more nervous,” he says.

Huntley adds that it’s not just planners feeling the brunt of a stark PI market.

“The whole financial services market is in the same boat in terms of cost and accessibility,” he says. “Fund managers, private equity, stockbrokers, they’re all experiencing the same issues. The insurance market globally is going through a very hard cycle.”

The average annual PI insurance cost for advisers has doubled in recent times, Neary says.

“A few years ago planners could get a quote for $5,000 with no excess. They can still get it for $10,000 but the excess is going to be between $15,000 and $20,000,” he reveals, adding that some advisers are still unable to find cover. “Every industry and most professions have had their issues, and the big overarching issue is Covid-19; insurers are unwilling to write in new risk unless they have to.”

‘It just needs time’

Despite the gloom, brokers see light at the end of the tunnel for advisers and the broader financial services markets. If it comes, however, it likely won’t appear until mid-to-late next year.

“As the market turns, if we get one or two more insurers it will eventually come into a softer market,” Huntley says. “Some are saying middle of next year, but it’s difficult to predict.”

The entry of new providers into the market is key. In February this year MKM Partners senior partner Oscar Martinis predicted a relatively similar timeline, noting that a number of Lloyds syndicates withdrew from the PI sector in 2019, on top of providers Dual Australia, Vero and Axis in the preceding years.