With an increasing number of agents exploring diversification opportunities and new revenue streams, MINT Insurance Brokers claims that many lack the correct level of Professional Indemnity (PI)
With an increasing number of agents exploring diversification opportunities and new revenue streams, MINT Insurance Brokers claims that many lack the correct level of Professional Indemnity (PI) cover, making many policies null and void.
Following a review of their property client database, the firm found an alarming number of estate and letting agent case studies where there was either insufficient insurance cover or, in some instances, a policy covering an entirely different profession.
According to MINT’s Director, Oliver Wharmby, PI only covers you for what you disclose when you arrange the policy, so if you branch out into additional services, your insurance may not be valid.
“More and more agents are exploring new services such as block management, rent to rent, inventory services, auctioneering, EPC’s, buying agency services,” said Oliver. “But unless you disclose the full extent of your business activities, you may find yourself exposed.”
He added: “A common problem is where agents are interpreting ‘estate agency’ to include lettings and property management. Estate agency activities involve the sale of property and will not necessarily include lettings and management. In addition to this, agents are assuming estate agency and letting agency will extend to include commercial sales and lettings. Different rates apply depending on the business activities and ‘estate agency’ does not include all and sundry.”
Regulators across the UK often mandate PI insurance for its members and many have also warned that without the right level of cover, agents could end up losing their licence to operate.
Sarah Rivers, Group Leader of Rent Smart Wales, said: “The Housing (Wales) Act 2014, requires any person completing letting and management activities in Wales to be licensed. All licences are issued with licence conditions to protect the consumer and which the licensee must abide by.
“One of these conditions is that the licensee must obtain and maintain, throughout the licence period, professional indemnity insurance which is appropriate and sufficiently comprehensive for the business. Checks we undertake often reveal issues which cause concern. Should cover not be in place or inadequate, the licence could be at risk of revocation.”
Charlie Bending of DAC Beachcroft Solicitors, whose team handles many of the claims for one of MINT’s facilities, is already seeing an increasing number of claims against property managers in the lettings industry following the pandemic.
He explained: “The anticipated increase in claims against property managers is as a result of likely rental default caused by anything from a failure by the property manager to take steps on behalf of the landlord to address maintenance issues to (more likely) tenants being unable to pay rent/refusing to pay rent due to their adverse financial situation.
“This could lead to claims that the property manager failed to vet tenants appropriately in the first place and the protection from eviction tenants have benefited from due to the Coronavirus Act 2020 will only increase landlords’ losses…those without appropriate PI cover could find themselves uninsured and having to fund claims out of their own pockets”.
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