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Report

Professional Indemnity (PI) insurance pricing and claims trends for communications, media and technology (CMT) companies 

December 2024 

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Foreword:

  • Technologies, such as artificial intelligence (AI), machine learning (ML), and hyper automation, are improving daily business operations at a rapid pace. However, these technologies, while transformative, have also exposed businesses and individual professionals to new risks that are proving to be complex and challenging.
  • In contrast to the previous years, 2022-23 saw enhanced engagement on claims in terms of volume, quantum, and complexities of the notifications under PI policies. We have seen considerable magnitude of claims arising out of breach of contract, negligence in providing services, and failure to reach agreed contractual targets.
  • Claims related to contractual breach arising out of cyber incidents are also increasing. This is exposing corporates to large risks, reinforcing the need for comprehensive PI polices to ensure sound risk-mitigation is in place to protect the insured from financial and reputational hazards.
  • This report provides an in-depth analysis of claims and pricing trends for PI insurance, along with introductions to the solutions that Marsh offers.

PI insurance at a glance:

What is PI insurance?

PI Insurance provides cover for claims made by a third-party for an alleged wrongful act stemming from professional services provided by organsations or individuals.

Who is the insured?

This cover can be purchased for companies (including covered subsidiaries), directors, officers, employees, or any other specified professionals providing services.

What is a wrongful act?

Failure to adequately provide professional services, breach of duty to exercise reasonable care, unintentional breach of contract, breach of confidentiality, errors, omissions, or negligent acts committed while providing professional services to a third party.

Damages covered

Defence costs, settlement amounts, others (subject to policy conditions and exclusions).

Jurisdiction and volume of PI notifications:

36%

Claims from US

16%

Claims from UK

12%

Claims from India

36%

Claims from the rest of the world

Of the total PI claim notifications handled by Marsh India, 36% originated in the US, followed by the UK (16%), India (12%), and 36% in other countries from the rest of the world, including Brazil, Belgium, Malaysia, and Spain.

34%

2020-2021

40%

2022-2023

*The above statistics are based on data collected for Marsh India’s clients during the period of  1 January 2022 to 31 March 2023.

Marsh India clients experienced a 6% increase in notifications under their PI policies in just two years. This trend can be attributed to the solutions and services offered by CMT companies to their clients becoming more complex - highlighting increasing risk for companies and individuals to consequences arising from carrying out their professional services.

Evolving nature of PI claims:

45%

Negligence in provision of services

27%

Others

14%

Breach of professional duty

10%

Breach of agreement/contract

4%

Delay/failure to perform services

*Other factors may include statutory breaches, failure to complete project milestones, cyber breach leading to a PI claim. 

As organisations embrace innovation to ensure growth and expansion, businesses can often be exposed to unknown risks. With over 45% of total claims notified, negligence in providing professional services continue to be the major cause of financial loss for businesses. Breach of professional duties, delay/failure to perform services, and non-adherence to contractual requirements are among further risks to businesses when conducting professional services.

Marsh India has recorded PI claims ranging from US$20 million to US$100 million in the past two years, illustrating how crucial it is for companies to invest in holistic PI policies, to avoid high payouts from claims that could have been mitigated by a PI policy.

Quantum involved in PI Claims:

Damages and defence costs*: Four largest PI claims handled by Marsh India

1

Initial demand - £51M
Settled with claimant - £15M

Final payout by insurer (defense costs + indemnity)- US$ 23M

2

Initial demand - £76M
Settled with claimant - £15.4M

Final payout by insurer (defense costs + indemnity) - US$ 20M

3

Initial demand - US$54M
Settled with claimant - US$5M

Final payout by insurer (defense costs + indemnity) - US$ 5.4M

4

Initial demand - US$34M
Settled with claimant - US$6.5M

Final payout by insurer (defense costs + indemnity) - US$ 1.78M

*All the figures mentioned above are approximate figures.

Our clients have witnessed huge initial demands, owing to their complex business transactions, consequently leading to allegations of serious contractual breaches, failure to perform adequate services, or breach of duty. Often, contracts can lack limit of liability provisions, which leads to claimants claiming huge quantum of damages. Considering the quantum and stakes involved, engaging specialised legal services can add to legal costs and financial exposure. While initial demands are high, final settlements can be much lower. This can be attributed to negotiations between the parties and involvement of legal counsels, as well as insurers.

For a considerable number of PI claims, the final payout by the insurer was lower than the settlement amount. This is largely owing to the deductibles under the policy, and further reductions made by the insurers on account of breach of policy conditions, such as prior consent not being sought, delayed intimation, and unreasonable rates of defence counsels appointed.

Marsh has a robust claims team advocating for the clients and ensuring smooth claims management, timely notification to insurer, catering optimum assistance on appropriate strategies and risk mitigation to secure reasonable settlement of the claim.

Challenges in PI claims settlements*

Delayed reporting Problem

Problem
Notifying a claim/circumstance outside of the policy period.

Solution
Timely reporting of claims, whether actual or potential, and creating a robust internal claims reporting process.

Non-disclosures/ misrepresentation in the proposal forms

Problem
Denial of coverage, owing to matters not disclosed in the proposal forms such as prior/pending litigations.

Solution
Insureds must fill the proposal forms diligently, giving comprehensive and full disclosures about prior events and business procedures.

Inability to establish legal liability

Problem
Incidents in which legal liability cannot be ascertained, will not be covered under the policy.

Solution
Insurers always ask for a liability quantum assessment, which is a legal counsel’s opinion on a claim. This assessment should ideally include the lawyer’s opinion, defense strategy, and risk assessment of insured’s defense.

Defence costs incurred

Problem
Reduced pay-outs towards costs incurred, without obtaining insurer’s consent or which the insurer feels are more than reasonable market rates.

Solution
Insureds must inform the insurer as soon as possible on their intent to appoint a defense counsel and take insurer’s consent. Furthermore, insureds must also assess the reasonability and value of counsel’s rates.

Settlement without insurer’s consent

Problem
Insurers disallow any settlement entered into without their express consent.

Solution
Allow insurers the opportunity to associate themselves with the defence of the claim and give consent to the settlement before negotiating or finalizing a settlement.

PI insurance pricing trends:

In 2022, PI insurance experienced a moderate 11% year-on-year price increase despite a higher frequency of claims, with large companies renewing with marginal premium increase (12%-17%). Meanwhile, mid-sized and small companies experienced deductible/retention amounts rise by about 66% - due to large claims across the CMT industry. Further blended PI and cyber programme prices increased by 15.65%, primarily due to excess layer pricing aiming for a second correction, in contrast to a sharper increase in 2021 (36.36%).
 

Policy

ROL – 2020-21 (primary and excess)

ROL – 2021-22 (primary and excess)

Change in average ROL (%)

PI

4,553

5,054

11

Cyber - PI

14,473

16,738

15.65

*Method: Our observations are based on the calculation of the primary and excess rate on-line (ROL) which is the premium charged for a policy limit of US$1 million.  For this report, we filtered these by revenue sizes categorized as large (>US$1 billion), mid-size (US$200 million to US$1 billion), and small (<US$200 million) and the number of claims per policy, client, or revenue segment.

Conclusion:

  • 2022-2023 was a year of large losses, complex claims, and evolving markets. Marsh India’s clients reported multiple high value claims under their PI policies - with multiple large payouts by insurers.
  • Some of India’s tech-giants experienced rises in claim values, leading to underwriters adopting conservative approaches while writing PI risks - via methods such as, increased deductibles/retentions and restricted capacities.
  • Insurers continued to place heavy reliance on disclosures made in proposal forms, adherence to policy terms and conditions, and interpretations of contractual agreements while assessing PI claims.
  • Rising cyber incidents have led to businesses witnessing an influx of high value demands for damages on account of breach of duty of care and interruptions of business services. These incidents highlight why it is crucial for organisations to invest in comprehensive PI and cyber insurance programmes.

Know your team

Marsh has an unparalleled team of claims advocates, who have handled PI claims across industries and continue to render subject matter expertise and new age solutions to its clients.

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Leadership

Anup Dhingra

Managing Director, FINPRO IMEA

Bhishma Maneshwari

Chief Client Officer, Senior Vice President,  Communications, Media and Technology Leader, Marsh India  


  

Jay Shah

Chief Growth Leader, Senior Vice President,  Financial Institution Leader, FINPRO, Marsh India

Nachiket Shah

Senior Vice President, Management Liability Leader, FINPRO, Marsh India

Anshu Maheshwari

Senior Vice President, FINPRO, Marsh India

Indranil Roy

Senior Vice President, Corporate Segment Liability and Construction Leader, Marsh India 

Claims team

Sidhartha Pattnaik

Senior Vice President, Head of Claims, Marsh India

Akshara Sharma

Vice President, FINPRO, Marsh India

Nanki Arora

Assistant Vice President, FINPRO, Marsh India

Arpita Cuddapah

Assistant Vice President, FINPRO, Marsh India

Aishwarya Shetty

Assistant Manager, FINPRO, Marsh India

Urja Doshi

Assistant Manager, FINPRO, Marsh India

Jyotika Aggarwal

Assistant Manager, FINPRO, Marsh India

Other contributors

Karan Shah

Senior Vice President, Head of Claims, Marsh India

Malika Bajpai

Senior Relationship Manager, FINPRO, Marsh India 

Disclaimer: Marsh India Insurance Brokers Pvt Ltd is a subsidiary of Marsh McLennan. Marsh shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any modelling, analytics, or projections are subject to inherent uncertainty, and the Marsh Analysis could be materially affected if any underlying assumptions, conditions, information, or factors are inaccurate or incomplete or should change. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as insurance brokers and risk consultants and are not to be relied upon as actuarial, tax, accounting or legal advice, for which you should consult your own professional advisors. Insurance is the subject matter of the solicitation. For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding the sale.

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