A new audience for PI

You know when you get stuck in some horrendous event - like being trapped on a jam-packed train in the hot weather when the air conditioning fails? One consolation that helps retain the sanity in these situations is to be thankful that friends and loved ones are at least "away from all this".

Well, the same charitable thoughts could equally be applied to the well-being of brokers. Their market has endured more than its fair share of the proverbial slings and arrows, but there have been two recent conflicts from which insurance brokers on the general business side have escaped practically unscathed.

One is the furore over the alleged mis-selling of payment protection insurance (mainly involving lenders and the mortgage fraternity), while the other has been the on/off/on introduction of the controversial Home Information Packs affecting estate agents and again, the mortgage people.

But now comes a warning from Hiscox that in the latter case, the need for professional indemnity cover for those responsible for reporting under the HIP scheme now has to go on the broker agenda. Incorrect energy reporting could land the newly titled 'Domestic Energy Assessors' in court and cost home owners thousands of pounds.

Every house with four or more bedrooms placed on the market for sale in England and Wales now needs an Energy Performance Certificate (EPC) as part of the HIP. In particular, domestic energy assessors will need to have appropriate PI cover in place to fulfil their duties, and to cover them for any error which could potentially result in litigation.

An energy rating that is wrongly assessed as too low could result in homeowners being forced to reduce the sale price of their home, or waste money on unnecessary improvements. Equally, if an energy rating is wrongly assessed as too high and it is later discovered that in reality it is a lot lower, then the homeowners may be forced to spend large amounts of money on improvement to bring it back up to an acceptable energy rating.

Sam Franks, regional underwriting manager at Hiscox explains. "If energy assessors don't get it right, they could potentially cost homeowners thousands of pounds in losses, and leave themselves exposed to legal action, even if the allegations are unfounded. Professional indemnity insurance is a mandatory requirement for energy assessors. It not only protects them, but also provides reassurance to homeowners that they are not dealing with rogue assessors."

I asked Mr Franks about the risk management aspects of this new PI market audience. "Because it's such a new area, with brand new titles and qualifications, it's too early for us to point out specific things particular to energy assessors," he says. "We are however using our experience of writing PI for people in the property profession to understand what makes a good risk, and what doesn't. The first assessors went on cover on 1 August when the regulations were put in place, so there's no claims activity yet, but when we start to see that coming through that's when I think we will be able to offer more of a risk management steer."

As an observer watching the HIP switch being turned on and off, while sympathising with those on the receiving end, there's been the consolation that at least it's one less arrow for general brokers to contend with. I asked Mr Franks for a view on this chopping and changing.

"Over the years the HIP went from being something that was intended to be a lot broader, applicable to all domestic property. Due to start in June 2007 for all house sales, it actually arrived two months later in a diluted form. But there's still a phased introduction planned towards all house sales, and eventually into lettings, and potentially commercial sales from an energy assessment point of view.

"Yes, it has been very controversial and certain elements which were originally planned to be compulsory, then became optional. It has changed a lot since it was originally proposed a good number of years ago. We have been following this progress, and now it is in place it's clear a lot of the energy assessors were holding back until the programme was definitely up and running. They needed to have guaranteed work before wholeheartedly committing themselves to this profession, even though it is now in place, admittedly in a fairly limited form at the moment.

"We are now seeing more people join this profession because there is the promise of work. It is starting to build up, but possibly from a more limited base of professionals than had originally been anticipated if all property was to be involved."

Indeed, another item for the broker PI agenda.