What can go wrong?
Buying, selling and letting property can be a complicated and stressful process and when things go wrong estate agents are vulnerable to claims for things like failure to manage a sale properly; omitting to perform a credit check; missing a rent review; non-renewal of a lease or failure to repair property (bodily injury claims are increasing in number). Where their services extend into the realm of property development, suddenly the financial stakes become much higher and clients more litigation-savvy.
Some professional bodies, including the Royal Institution of Chartered Surveyors (RICS), the National Association of Estate Agents (NAEA) and the Association of Residential Letting Agents (ARLA), require members to have appropriate professional indemnity cover in force. Beyond that, policy coverage varies across providers but is often written on a standard wording with extensions for sector-specific risks – for example, defence costs for proceedings brought under the Consumer Protection for Unfair Trading Regulations 2008.
Insurers will also offer cover for extra clauses such as breach of confidence, loss of documents and defamation – the latter can sometimes be an issue in this highly competitive sector.
What are insurers looking for?
Appropriate knowledge of the geographical area as well as average and highest property values transacted. Also of importance is the ability to demonstrate ethical business practices, good internal risk management and robust diary systems.
Insurers will look at the full spectrum of activities undertaken but generally consider commercial work to be higher risk than residential work – clients have deeper pockets, numbers are larger and ‘slip & trip’ claims are more common. If the practice provides financial advice beyond an introductory service, a standard estate agents’ product won’t be adequate.