Turbulent times ahead for property professionals
The status quo for those operating in the housing sector is set to change. Many well-known High Street names are in trouble, sales activity falling due to uncertainties around Brexit and the wider UK economy. Pipeline predictions show no imminent recovery. This pressure is aggravated by the emergence of web-only platforms with aggressive pricing and the Government’s plans for wide-ranging reform of the housing market. With confidence in automated valuation methods growing, the perfect storm appears to be brewing. Casualties and market consolidation appear likely. This presents both opportunities and challenges for insurers; but if the short-term by-product is downward pressure on professional pricing structures and service standards, the whole risk/reward debate may reopen, along with a spike in customer dissatisfaction.
Accountants will face more regulatory intervention
Over the last couple of years, the level of fines for misconduct by accountancy firms has increased manyfold. The focus has firmly been on the need to deter, which in the case of the larger firms has meant agreeing on several occasions to seven-figure fines. Despite this, the Financial Reporting Council (FRC) is coming under media pressure to do more. Forthcoming changes to the FRC’s sanctions regime means the FRC can disregard precedent when setting fines and we predict we shall see further headline-grabbing fines. Furthermore, following changes to the FRC’s disciplinary process last year (a breach of a ‘relevant requirement’, rather than misconduct, now justifies investigation), the movement remains very much towards more regulatory intervention.
Claims against technology companies will continue to rise
In the last few years, we have seen an increase in the frequency of claims being brought against technology professionals, and in particular disputes arising from changes in the original specification to reflect advances in the technology since the project was originally conceived. In such circumstances, the client may well look to terminate the contract in favour of another, more attractive and newer product from another supplier, or dramatically change the specification, which will result in delays and cost overruns. Coverage issues relating to breach of contract exclusions, delay exclusions and fees counterclaims frequently arise.
Legal indemnity insurance will become more popular
With an estimated 20% of residential conveyancing transactions already involving the purchase of a legal indemnity policy, we anticipate this percentage will continue its upward trajectory in the coming year. Developers routinely take out bespoke policies to deal with defective title issues, absence of easement for access and/or services and restrictive covenants that might inhibit development. Policy premiums will almost always be less than the cost of searches or the time and cost of traditional due diligence. That and the transfer of risk away from a firm’s professional indemnity policy mean this is a trend set to continue.
The full 'Insurance Remodelled: 2018/19 Market Conditions and Trends' Report can be accessed here: