Reviewed Feb 2017Copied below is an edited version of a letter to, and response from Graham Strez of the NZACS Claims Committee:Hi Graham,We are currently looking at Professional Indemnity Insurance. Our insurance broker has suggested a very competitive policy, but we want to be certain that it provides us with the cover that we require. Can you help please? Hello Henry,NZACS is a co-operative of architectural firms, set up and run by and for architects in response to the particular needs of NZ architectural practices. The PI insurance they arrange reflects that, and the “bulk-buying” power of the group. In the event of a claim, they have senior experienced architects in a liaison role to work directly with you, and to provide technical assistance to the lawyers and insurers.NZACS is considered to be a leader in its field in terms of innovation, continuity of architectural interest, and the claims management process. It provides considered advice to member firms in respect of particular claims, more general advice in its newsletter “Communique”, seminars on risk management, and works with the NZIA in matters of common interest. For over 30 years, and in recognition of loyalty to the co-operative, it has provided free runoff cover to retired architects.New insurers have come and gone, perhaps with offers of low cost cover and perceived coverage advantages, which evaporate when they are proven unsustainable. Having read the policy that your broker has sourced, and bearing in mind that all PI policies vary a bit from year to year and should be specifically read for the detail, I note:NZACS provides for an automatic reinstatement of the insured sum. Your broker’s policy provides a higher level of cover instead. But that higher level of cover may merely be a bigger target, meaning that you might have no cover for a subsequent claim.It’s hard to see how a broker working in a one to one relationship between your firm and an insurer (or even with several firms) could offer better cover and better claims response, as well as being cheaper! When negotiating costs and policy terms with insurers, NZACS can leverage 40 years of experience, the management of over 3000 claims, long-term stable relationships with brokers and insurers, “in-house” technical involvement by architects in claims management, and the buying power of 700+ members of the co-operative.So the question is: why is your brokers policy “cheaper”? Is it because the insurer does not understand the risks and is in the market for the short term to hoover up premiums and exit before you need to make a claim? Is it because they have crafted the policy terms to transfer the nastier risks onto you? Is it because when a claim arises they focus their efforts on their commercial bottom line (i.e. profit) instead of your best interests?If you never face the risk of a claim, then a cheaper policy makes commercial sense. If this were the case, then why purchase PI cover at all: you would not be the first “faultless” firm unexpectedly facing a claim that apparently dropped out of nowhere. Even the cost of defending a meritless claim is a risk worth insuring for, prudently.When all is said and done, the exact policy wording – or even the cost - may not be the key issues. It comes down to the same design decisions we all make as architects: how do you decide between cost and value? In my view, the value of a co-operative that has a proven record of focussing on the best interests of its members is pretty persuasive.