A brief guide to solicitors’ professional indemnity insurance (PII) in 2022

A brief guide to solicitors’ professional indemnity insurance (PII) in 2022

An Overview of the Latest Developments

Professional indemnity insurance (PII) is among the major overheads UK lawyers and law firms incur in their practice. Although we’ve only just entered 2022, the April 2022 Solicitor’s PII renewal season is rapidly gaining upon us. More importantly, there is a high churn rate of insurance companies entering and exiting the market. Therefore, now is the time to look for the best providers, PII premiums, and payment solutions to cover their properties and personal assets, should their practice fail. With new COVID-19 variants making headlines and causing business disruption, solicitors will likely be seeing an increased number of professional negligence claims.

Market Overview and Latest Developments

The solicitors’ professional indemnity insurance market is gradually becoming more volatile every year. This is mainly due to the minimum terms required of insurers by the SRA, causing an unprecedented level of resentment. As a consequence, many traditional PI insurers are avoiding insuring solicitors.

With fewer players in the market, the level of competition is drastically changing, and the cost of insurance is consistently on the rise. In terms of revenue, the PII market is worth over £250 million in annual premiums, thanks to over 11,000 law firms practicing in England and Wales.

Big Rise in PII Premiums

With annual premiums rising over 27% on average across all solicitors firms around the UK, there’s been a massive decline in the number of insurers offering cover. This trend is set to continue for the April 2022 renewal season, especially after primary limits were reduced to £2 million in 2021.

SME Law Firms Face Demand for Personal Guarantees

Unfortunately, rising PII premiums isn’t the most significant challenge SME law firms face. Another trend developing in the market is a growing demand for personal guarantees by certain insurers that put solicitors at even more risk than before. This is essentially a written promise by the director of a law firm guaranteeing they will personally repay any debt owed by the business even if they have to use their home and other personal assets to do it.

Personal Guarantee Insurance Becoming Popular

In response to the growing demand for personal guarantees by insurers, a new solution has emerged in the market designed specifically to help protect law firms from losing their collateral in case of an unfortunate event. Personal Guarantee Insurance (PGI) is an annual policy providing solicitors and SME law firms with the coverage required to repay a debt when they don’t have the available cash resources.

With personal guarantees becoming a trending requirement, solicitors are preparing for the likelihood of this solution becoming a mandatory requirement to balance the risk of both parties. So, any firm looking to get coverage should ask their insurance broker to confirm if a PGI will be needed as well as the run-off premium to fully comprehend what’s at stake in case their business faces financial turbulence.

Cyber Insurance Requirements

Lastly, conveyancing firms may be forced to buy stand-alone cyber coverage as the SRA recently clarified that the consumer protection afforded by PII for losses due incurred due to Cybersecurity threats will only cover clients and third-party applications. However, cyber insurance becoming mandatory will have no impact on the minimum terms.

Conclusion

To say that a lot is happening in the professional indemnity insurance market would be an understatement. What we know for sure is that PII remains an important policy for law and conveyancing firms looking to protect their financial assets from losses. With April 2022 on the horizon, firms need to sit down and thoroughly assess their risk and look for the best coverage available in the market.

From file reviews, gap analysis and financial assurance support, the team at Legal Eye can provide a 360 view on your business to help you prepare for your PII applications. Call 020 3051 2049 or email bestpractice@legaleye.co.uk

This article was submitted to be published by Legal Eye as part of their advertising agreement with Today’s Conveyancer. The views expressed in this article are those of the submitter and not those of Today’s Conveyancer.

Legal Eye

https://www.legal-eye.co.uk/

Legal Eye works with law firms to ensure compliance and optimise performance. Their extensive and thorough knowledge of the law and regulations will ensure your law firm is compliant and your processes sound. Files are audited to ensure you are not only complying with the service level agreements you have in place, but very importantly, also the code of conduct. They provide a documented audit trail which is firstly, a requirement of the code of conduct and secondly, essential for PI Insurance purposes and very often for CQS, Lexcel and other quality accreditations. This provides documented evidence of a proactive approach towards risk management. The advice they offer is clear and practical, and they pride themselves on exceptional customer service and unbeatable work quality.

Services include:

  • Specialist expertise across the full range of regulatory, risk and compliance issues to inform your internal decision making.
  • Additional qualified resource where you simply do not have the time to review your regulatory position or to carry out essential ongoing tasks such as file reviews.
  • An online risk hub –  an online resource centre for law firms. The hub provides a comprehensive bank of resources to help COLPs, COFAs, partners, directors and managers to manage risk. It includes precedent policy and procedure documents and templates, access to online training on a range of risk and compliance topics, and a range of useful materials such as ‘how to’ guides, short videos and articles.
  • Drafting and review of key policies and procedures including the supply of ‘document packs’ to save you time researching and writing documentation.
  • Expert advice on how to comply with up-to-date regulation including the very latest requirements complete with a written set of recommendations.
  • Specialist outsourced complaints  handling service provided by former SRA and LeO officers.
  • Gap analysis of your firm’s policies, processes and procedures as they relate to the Solicitors Accounts Rules (SAR) including the production of a written report summarising the strengths and weaknesses of the current arrangements and detailing recommended next steps and actions to put your firm in an even stronger position.
  • Training on SAR and on anti money laundering (AML) as well as other finance-related training which can be delivered virtually for your firm, face-to-face (subject to government guidance) or online via Legal Eye’s Training Academy.
  • A Standard Procedures Manual to provide a practical and comprehensive roadmap for firms to follow when looking to double check whether the current operating procedures are fit for purpose, setting up a new firm – or arm of a firm – or starting a new finance function from scratch.
  • Experienced advice and support for one-off projects such as achieving quality accreditations or switching regulators.
  • Proven high quality training for fee earners and staff held at your office/s covering essential risk topics such as  Anti Money Laundering, data  protection, cybercrime, conflict of  interest and more.
  • Online training from The Legal Eye Academy – core modules available to all staff at their convenience. Includes built-in auto reminder functionality so that you no longer have to chase staff indi-vidually to complete important training. Your package includes free updates to ensure knowledge is always up to date.
  • Added value updates by email to all your key people covering all the latest updates on risk and compliance.
  • The Legal Eye team includes former solicitors, partners and directors in law firms; former case handlers at regulators such as the Solicitors Regulation Authority and the Legal Ombudsman and experienced risk and compliance professionals.
Contact: Paul Saunder Tel: 0203 0512 049 Email:  bestpractice@legal-eye.co.uk Address The Old Grammar School Church Road Thame Oxfordshire OX9 3AJ

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