Professional indemnity insurance sits squarely inside the FCA's Consumer Duty framework, and the price and value outcome under PRIN 2A.4 is the one that gives brokers and insurers the most work. A firm distributing PI cover has to be able to demonstrate that the product represents fair value to the customer, that the assessment has been carried out on a defensible methodology, and that the evidence is on file for review. This entry sets out the statutory framework, the factors a broker such as Apex Insurance Brokers weighs when running a fair value assessment on a PI product, and the way findings feed back into product governance.
PRIN 2A.4 (the price and value outcome) requires firms to ensure that the price paid by a retail customer for a product or service is reasonable relative to the benefits of the product or service. That obligation sits alongside the FCA's product governance rules in PROD 4, which allocate manufacturer and distributor responsibilities across the chain, and the finalised guidance in FG22/5 on product oversight and governance. For general insurance products the rules bite harder because the FCA has, since the General Insurance Value Measures Reporting Rules 2021, required insurers to submit value measures data covering claims frequency, claims acceptance rates, average claim payouts and complaints. That value measures reporting (VMR) data is now the backbone of any credible fair value assessment on a general insurance product, PI included.
Value is not price. The FCA is explicit that a cheap policy that fails to deliver on claims, or a premium priced against a limited target market, can both fall foul of PRIN 2A.4. Apex Insurance Brokers approaches value as the sum of the benefits the customer receives across the full journey — the strength of the wording, the insurer's claims record, the broker's advice at inception, the mid-term support, the claims advocacy — measured against the total price paid. Total price is not the premium alone. It includes the insurer's net premium, the insurer's profit margin, claims handling costs, insurance premium tax, and the broker's fee or commission.
A proper assessment considers each component. The insurer's net rate and expected loss ratio establish whether the underlying product is priced against the risk it carries. VMR data — publicly available for every reporting insurer — shows how often claims are made, how many are paid and at what quantum, and how many customers complain. A PI product with a very low claims frequency and very high complaint volume is a red flag. So is a product where the premium has drifted materially above the equivalent cover from other insurers without a corresponding uplift in wording strength or claims service.
The broker's own fee sits inside the same assessment. Apex Insurance Brokers documents, for each professional client, what the fee is buying — the placement work, the negotiation with underwriters, the drafting of the demands and needs statement, the ongoing claims support — and tests whether the fee is reasonable relative to that service. A £600 fee on a straightforward £4,000 solicitors' PI placement is defensible; the same fee on a £900 renewal for a sole-trader IT consultant is not, and would be adjusted.
Worked example (illustrative only — not a quotation). Apex reviews the PI product recommended to a five-partner solicitors practice. The premium is £4,000 including a £600 broker fee. The fair value considerations Apex records on file run as follows. First, VMR data for solicitors' PI in the relevant risk band shows a claims frequency of 12% per annum, an average paid claim of £45,000, and a loss ratio of 82% across the market — the insurer's product sits close to the median. Second, the service value: Apex delivers the placement advice, negotiates the terms with three underwriters, drafts the fair presentation, and provides claims advocacy through the year. The broker fee is reasonable relative to that scope. Third, alternatives were tested — a direct-writer offered £3,600 for headline cover but no advice, no negotiation, and no claims support, which would not meet the target market's needs. The conclusion, recorded on the client file and archived, is that the recommended product delivers fair value. The assessment is reviewed at renewal.
The fair value assessment is not a one-off document. Apex Insurance Brokers maintains an assessment file per product line — solicitors, architects, surveyors, accountants, IFAs, IT consultants — that records the target market, the value drivers, the price components, the VMR data considered, and the outcome. The assessment is monitored across the year: if VMR data moves adversely, if complaints rise, if claims service deteriorates, the file is reopened. Where unfair value is identified the response is documented — a repricing conversation with the insurer, a change of insurer at renewal, a fee reduction, or, in serious cases, ceasing to recommend the product. The broader Consumer Duty framework that sits above this exercise is set out in the entry on PRIN 2A for insurance brokers.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.