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Can I cancel a PI policy mid-term

My PI insurer wants to charge a disproprtionate additional premium for a relatively minor adjustment

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I am a semi-retired FCA with a 30 ysr+ claims-free PI record and very minimal fee income. Having been asked to conduct (in South Africa) some very basic pure accounting/reconciliation work for an international charity (with a duration of 10 days), my existing (and well known) PI broker was contacted to advise of this situation. Their response was to indicate that my PI premium would be increased by an immediate adjustment to 3.5 times its current level (despite being 9 months into my existing policy!). That increase in the premium equates to 25% of the agreed, and already discounted, fee-income! Have other accountants experienced any similar situation with minor (low-risk) variations to their existing policies resulting in extortionate and unjustified extra costs?

I had previously undertaken similar charitable work worldwide (excl. US) for many years without any effect upon premiums and in the insurer’s full knowledge. My immediate thought was to cancel the PI policy and take out a new one with another insurer, thereby providing cover for a year rather than the 3 remaining months in case any such work should recur. Previous insurers have not been so draconian in their view but I was told that I could not cancel an existing policy and this makes no sense at all to me. Is that right? Surely this would be a restrictive practice with no logic to it, as my current insurer’s risk would terminate upon its cancellation. I don’t expect a refund of a premium! To compound the problem I was informed that my existing insurer will not be offering to renew any accountants’ PI policies at their expiry as they have now  “dropped out of the game”, so I will need a new insurer anyway in 3 months.

Any comments or suggestions to deal with this matter would be very welcome. Thank you.

Replies (15)

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By johngroganjga
21st Feb 2020 08:06

Presumably the issue is that your policy has a geographical restriction that doesn’t include work in South Africa. So of course there has to be a premium to buy an extension to it.

Have you thought of trying to buy one-off cover for your South African assignment from another provider?

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Replying to johngroganjga:
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By M G Weemys
21st Feb 2020 14:29

Thanks for the reply. Yes, I'm pursuing that as a possibility. My policy already stipulates worldwide cover excl. US etc. - that's why I'm so annoyed about it!

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Replying to M G Weemys:
By johngroganjga
21st Feb 2020 17:04

M G Weemys wrote:

My policy already stipulates worldwide cover excl. US etc.

In that case I don't after all understand why you are being charged an additional premium.

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Replying to johngroganjga:
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By M G Weemys
22nd Feb 2020 11:12

I agree, although when I completed the initial proposal (based on the previous year), all of the reported fee income was (correctly) stated to have been generated only in the UK. I can only believe that because the charity is governed by the laws of SA, the insurers have jumped on this to justify their action and claim that it would not be covered under the policy. They have failed to give ANY reason why, if my policy states "worldwide" I should now still need to pay an additional premium especially since it is of negligible risk. Hence my irritation! However, my real gripe is that they are claiming that I cannot even cancel the policy mid-term and find an alternative (even if I am prepared to forego any recovery of the cost of the unexpired premium already paid. Without a cancellation I am unable to get cover anywhere else so it seems to be a "dog in the manger attitude" prevailing which I don't understand - it is my risk (and cost), not theirs, that I am suggesting should be removed by a cancellation of the policy. Thanks for responding to this matter for which I can see no logic other than for the insurer wishing to unfairly maximise their income.

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By Wanderer
22nd Feb 2020 05:03

M G Weemys wrote:

I don’t expect a refund of a premium!

Then is it a problem to leave the existing policy running?
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Replying to Wanderer:
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By M G Weemys
22nd Feb 2020 11:21

The problem is that they will not allow me to cancel the policy mid-term and therefore find an alternative provider. This is really the big issue! I am not permitted to have cover from more than one provider at the same time. This seems to be a ludicrous and highly restrictive consequence. Since my current insurer won't cover the "risk" without a significant additional premium I am therefore looking to see if I can get specific cover elsewhere (at a more reasonable cost) to run "alongside" my existing cover, although I would have preferred d a completely new annual policy to commence immediately. Do you think that is even feasible? Thanks for your interest and earlier a response.

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Replying to M G Weemys:
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By Wanderer
22nd Feb 2020 12:15

M G Weemys wrote:

I am not permitted to have cover from more than one provider at the same time.

Who's saying this?
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Replying to Wanderer:
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By M G Weemys
22nd Feb 2020 12:54

That detail was initially given by the broker (!!) but I subsequently spoke to ICAEW (and then via CABA) and also the insurer's own legal helpline who confirmed that situation, so I am forced to believe that this is the case. Seems ridiculous to me that I am bound to a service that I don't want and results in my disadvantage! ( understand that there is a potentially risk for fraud in having 2 policies in operation if any claim were ever to be made (twice for the same incident - at least that was what CABA told me!)

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By cormocountry
25th Feb 2020 21:10

This sounds to me to be a case of collusion with your broker & current insurers.

I'd be inclined to look at changing both..!!

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Replying to cormocountry:
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By M G Weemys
26th Feb 2020 13:27

That is certainly my view and intention (but also the immediate problem, as they won't "let go")!

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By pauljohnston
26th Feb 2020 12:57

I am a littlke confused. If the current policy does not cover you for south africa then if you take cover for that State with another I dont see how this is a problem.

Can I suggest that you approach a broker based in SA and tell him you need cover whilst working in SA and ask how much.

Leave your current contract in place covering the UK

In one of your coments you have said "Subject to Claims conditions 5.4 (Fraudulent Notifications) this Policy may not be cancelled unless the Insured and Insurers agree mutually in writing to cancel the Policy". The last laugh next year could be yours and that is by not giving the agreement required by this clause.

Please let us know haow this pans out

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Replying to pauljohnston:
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By M G Weemys
26th Feb 2020 13:25

Thanks for your suggestion to try and get cover directly thru' a SA insurer which is appreciated. I suspect that this could be a sensible solution (and one that had not occurred to me)! I suspect that getting "stand-alone" cover here for a short period etc. could present difficulties. I'll keep you posted ....

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Hallerud at Easter
By DJKL
26th Feb 2020 13:51

Well, as a last resort you could indicate to the current insurance company you were considering naming them on Accounting Web. (albeit care may now be needed given some of the thread comments)

I have had some success threatening power companies that if they do not step up (usually just not doing something/sorting something) I will advise our energy brokers that in future I do not want to see their name in the list of price quotes supplied for any of our properties- frankly your broker, if the insurance company are being unreasonable, ought to be flexing its muscles on your behalf; there is little point having a broker if he does not sort these types of issues.

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By Tim Robinson
27th Feb 2020 11:29

Could you do the work as an employee rather than an independent contractor?

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Replying to Tim Robinson:
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By M G Weemys
01st Mar 2020 15:24

Afraid that wouldn't be a practical alternative as a work-permit would be required. To be realistic about all of this matter, every alternative strategy being tried seems to result in an uphill struggle and, at the end of the day, I reluctantly suspect that it will be a case of "biting the bullet" and paying the relatively extortionate premium if I want to do the work. Whilst still pursuing a possibility of getting specific stand-alone cover from another insurer, they all seem to be taking their time! Knowing my luck Covid 19 will probably also play its part in the meantime! Thanks anyway to all who responded with suggestions etc.

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