Check the insurance lifeboat is seaworthy

When the services of a surveyor or valuer are engaged, the customer, be they lender, applicant or broker, are essentially buying professional advice.

What is also being bought is peace of mind that if the advice turns out to be materially inaccurate and a loss is suffered, insurance, in the form of a professional indemnity policy rectifies the matter.

The same is broadly true of the legal and many other professions.

In the valuer world, the particular mechanisms in place mean that if the valuation firm goes bust before a claim is made, the insurer won’t pay out.

In difficult times, this encourages a higher level of claims, which in turn have pushed a number of respected firms into oblivion – precisely the opposite of what any interested party wants.

But the situation is much worse than that. In 2011 total global insured losses were $116bn. In the same year, insurer Lloyd’s reported a £516m loss.

Put simply, the insurance industry is running out of reserves, so not only do lenders and others need to verify the robustness of their suppliers, but also of the insurers behind those suppliers.

There is no magic solution and it seems inevitable some insurance firms will fold. This is another risk advisers should analyse on behalf of their clients. In the 100th anniversary year of the Titanic, it’s worth spending time to check the lifeboat doesn’t have any holes in it.