70 DB transfers later: How one South Wales firm sorted its PI renewal

There is no doubt that advisers are continuously finding the pressure of professional indemnity (PI) renewal a problem as prices rise and confidence steadily sinks. Here Sophie King talks to one firm that has successfully renewed its full PI cover with DB transfers proving no barrier...

Leabold Financial Management, based in South Wales, has recently achieved full renewal of its PI insurance, despite completing 70 defined benefit (DB) transfers, which has proven to be an obstacle for other firms seeking cover.

Research conducted by PIMFA found the majority (83%) of financial advice business owners and wealth management chief executives do not have confidence in their ability to secure affordable PI insurance in the future. A little more than half (56%) of the 84 respondents reported their professional indemnity (PI) insurance contained significant restrictions, including historic advice related to DB transfers, leaving firms without cover for advice given before the insurance policy began.

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For Leabold, however, that was not the case. The firm's compliance officer Derek Lavington tells PA why the firm was successful, sharing his tips and tricks for full PI renewal.

"It's not enough simply to make a good proposal to insurers, it needs to be backed up with real controls that can be evidenced as being effective," he says. "The choice of broker is also critical where so many firms are competing over such a limited capacity.

"The relationship between broker and underwriters needs to be such that the underwriter trusts the broker to present the best risks and that the time needed for detailed consideration of the proposal will be worthwhile."

DB transfers

In terms of DB transfers, Leabold's book is not huge, which Lavington says is not just coincidental: "We've never marketed this [DB transfers]. People use us through word of mouth. We go into the market very choosey and with a clear idea of what business we want and what business we don't want.

"Long before the regulator required it, we provided a fully non-contingent proposition. We also expressly exclude insistent client transactions and our policy is not to recommend a transfer unless we can identify a clear, immediate and tangible benefit to the customer."

He adds: "Hence, the kind of customer we attract are those who value advice, not those who simply want a transfer. As a small firm with limited resources, we also have to be selective with whom we do business."

Presenting your renewal

Upon writing a PI proposal, Lavington advises to consider the following: "You have to read the questions and you have to think what it is that the underwriter is wanting to establish."

He advises not to just write the shortest answer you can give, but to think about the motivation behind the question. "You are going to want to say a lot more than what is on the form. Cite relevant facts, the wrong thing is to wax lyrical about how great you are."

Elsewhere, the compliance officer comments that, with facts, firms should include their ambitions as well. "It's important to be honest about your intentions, so when an underwrite says 'how much business are you going to write? You tell them honestly."

He adds to not take the view of telling them less because you think that will get you what you want. "Be full, frank and honest. Emphasise your systems of control and your arrangements for monitoring risk."

British Steel

Many South Wales advice firms have been involved with the British Steelworker fiasco on both sides of the coin. However, Lavington says it is not something the firm has had a hand in. After discussions with British steelworkers, he says, either they did not like the firm or the firm did not like them.

He explains why: "Long before it came before a regulatory requirement to operate a non-contingent proposition we were doing so, specifically because of the reasons the regulator has recognised. The issues of conflict of interest, also because the work that is involved in advising somebody not to transfer is just as intense and expensive as advising somebody to transfer.

"Most steelworkers won't have a great deal of knowledge, and you say to them if you want to transfer, we can't guarantee we can do that for you but we are going to charge you for the advice." 

https://www.professionaladviser.com/feature/4022074/db-transfers-south-wales-firm-sorted-pi-renewal