RICS consults on PII

The RICS has launched a consultation to tackle problems surrounding current risk and pricing in professional indemnity insurance (PII) in the UK valuation sector that the institution believes are creating market dysfunction.

The quantity and cost of handling alleged negligence claims is having a significant impact on the cost of PII, not just for firms that have received claims but for the market as a whole. These structural problems could reduce client protection, limit competition within the market and lead to market failure, says the RICS.

In order to combat these problems, the RICS has commissioned a working group of valuation experts, including Sir Bryan Carsberg, former Secretary-General of the International Accounting Standards Committee, and key members of the insurance industry. The group’s report was launched in November and the RICS is now calling for input from members and stakeholders to help shape the final report.

The three-month consultation opened in December and the final proposals will be put to the government, lenders and the insurance sector during the spring.

Some key recommendations from the working group include:

• The RICS to work with insurers to examine whether an alternative approach to the current claim system could work, and what the impact would be on the market, valuers and the wider public.
• The RICS to consult government agencies and regulators to assess the impact of decreasing industry competition.
• The RICS to explore the option of an alternative scheme to assist with claims above a given value threshold.
• The RICS, valuation firms, insurers and lenders to review risk and reward levels in contracts.
• The RICS is extremely concerned about the practice of speculative claim letters being sent to property valuers on behalf of banks. A working group has been established to assess the problem and create a set of recommendations for members and the wider public. 

The RICS working group report on PII for valuations in the UK and a copy of the consultation document are available at www.rics.org

For more information, contact Trevor Rushton, Technical Director of Watts Group PLC, on 020 7280 8099.