Financial Lines Claims Trends and Insights

In an ever-evolving business landscape, understanding the trends and examples of financial lines claims is essential for brokers and their clients. These insights from the past year’s claims highlights key areas of concern, common pitfalls, and best practices to ensure appropriate coverage and effective claims management.

ENSURING APPROPRIATE COVERAGE

Business Descriptions and Retroactive Dates

Accurate business descriptions are vital in professional indemnity policies. They should encompass all the activities the insured undertakes or have undertaken in the past, particularly any that are unusual for their profession. Retroactive dates in claims-made policies determine the period from which claims can be covered. Ensuring clients understand and accurately set these dates is crucial to avoid gaps in coverage.

Indemnity Limits and Excess

The indemnity limit is the maximum amount the insurer will pay for a claim. Clients must be aware of whether legal costs under their policy are payable within their indemnity limit or in addition to their indemnity limit, as this affects the amount available for settlement. The excess, or deductible, can also be inclusive or exclusive of costs, impacting the timing of when an insured is required to incur out-of-pocket expenses.

CLAIMS MANAGEMENT BEST PRACTICES

Early Notification and Information Provision

When an insured becomes aware of a claim or circumstance, notifying the insurer promptly is essential. Delays can lead to complications and potentially affect coverage. Providing comprehensive information at the time of notification helps the insurer assess the claim. This includes incident reports, correspondence, legal documents, and any other relevant evidence.

Utilising Panel Lawyers

Using panel lawyers is generally preferred over the insured’s own legal counsel. Panel lawyers have expertise in specific areas of law relevant to the claim and offer competitive rates, ensuring efficient and cost-effective resolution of the claim.

KEY CLAIMS TRENDS

Employment Practices Liability (EPL)

EPL claims, including unfair dismissal, harassment, and discrimination, have been prominent. Increased awareness of employment rights and recent legislative changes have contributed to a rise in these claims. Statistics from 2023 indicate a significant number of complaints lodged with the Fair Work Commission and the Australian Human Rights Commission.

Australian Taxation Office (ATO) Investigations

ATO investigations into GST, R&D tax offsets, and other tax matters have resulted in substantial accounting costs for businesses. These investigations often span multiple years and can incur significant expenses.

Workplace Health and Safety (WHS)

Claims related to workplace safety contraventions are another critical area. Late notifications and failure to follow proper procedures can exacerbate these claims. Early notification and adherence to policy conditions are vital for managing these complex and potentially costly claims.

PROFESSIONAL INDEMNITY CLAIMS TRENDS

Architects and Real Estate Agents

Architects claims often stem from project management activities rather than design errors. Real estate agents face claims primarily related to property management, particularly for failing to arrange repairs for unsafe properties. Ensuring accurate business descriptions and adequate coverage for these activities is crucial.

IT Consultants

Claims against IT consultants frequently involve cyber-related incidents, such as social engineering attacks. These claims highlight the evolving risks in the IT sector and the importance of comprehensive coverage that addresses both traditional professional liabilities and emerging cyber risks.

LOOKING AHEAD: FUTURE PREDICTIONS

Insolvency Trends

The construction industry, in particular, has seen a rise in insolvency appointments, which is expected to continue. These situations often lead to claims under various policies, including management liability and professional indemnity. Understanding the interplay between different types of coverage is crucial for brokers and their clients.

Employment Practices Liability

New legislation under the Fair Work Act, which restricts contacting employees outside of work hours, may lead to an increase in EPL claims. Monitoring how this legislation impacts workplace dynamics and claims will be important in the coming year.

Increasing Costs and Social Inflation

Rising legal and associated costs, often referred to as social inflation, are a concern. Early engagement with insurers and proactive claims management can help mitigate these costs and improve overall claims outcomes.

CLAIMS TRENDS AND POLICY COVERAGE

The past year’s claims trends underscore the importance of thorough policy understanding,  cover that aligns to the activities of the business, and prompt notification of claims. By ensuring that clients are adequately covered and well-informed, brokers can help them navigate the complexities of financial lines insurance and manage claims effectively. As we move into Financial Year 2025, staying abreast of emerging trends and legislative changes will be key to maintaining robust risk management plans.

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Important Notice

Berkley Insurance Company (limited company incorporated in Delaware, USA) ABN 53 126 559 706 t/as Berkley Insurance Australia is an APRA authorised general insurer. Information provided is general only, intended for brokers and has been prepared without taking into account any person’s particular objectives, financial situation or needs. It is not intended to constitute legal advice. You should always obtain legal or other professional advice appropriate to your own circumstances. Insurance cover is subject to terms, conditions, limits, and exclusions. When making a decision to buy or continue to hold a financial product, you should review the relevant Policy Wording.