Reassuring the insurers to keep indemnity costs down

Reassuring the insurers to keep indemnity costs down

Brian Rogers FCMI, Regulatory Director at Access Legal, explains why compliance can help reduce the rising cost of indemnity insurance and why, as an industry, we must all promote best practice.

It’s no secret that the professional indemnity insurance (PII) market has been hardening for some time, particularly for areas of law deemed high-risk, like conveyancing.

According to insurance brokerage firm Lockton, the average cost of compulsory layer PII rose by around 10 to 15 per cent in the past year. Reduced capacity – and therefore competition – in the insurance market is partly to blame, following the exit of a number of key players who’d found their pricing models were no longer sustainable against the cost of claims. On top of that, the renewals process has become more time-consuming and firms’ financial health is coming under greater scrutiny.

The broker also points to ‘vastly inflated’ excess layer premiums and the fact that the ‘severity of loss’ has worsened following high-profile claims, such as buyer-funded developments and ground rent clauses. This has, not surprisingly, diminished the insurers’ appetite for risk. And, of course, losses experienced due to Covid-19 are also being felt across the insurance industry.

What’s worrying is that PII will become so costly that solicitors cannot make the most of opportunities in the housing market – such as the extended stamp duty holiday – to grow their conveyancing services.

But while there are no quick fixes, I firmly believe the industry can instil confidence in insurers and ultimately stem the cost of rising premiums. Regardless of the area of practice, the starting point for any law firm is a culture of compliance.

When staff consistently follow best practice, uphold standards and meet client expectations, you limit the chances of negligence claims being filed in the first place. As claims fall, it follows that firms become more attractive to insurers, encouraging new entrants and products in the market.

It is incumbent on partners, senior managers and compliance officers to monitor risk and make sure policies are clear, regularly-communicated and adhered to. Staff must be trained and competent to a level appropriate for their roles, in line with the SRA’s continuing competence requirements. They should also feel supported to do the right thing and deliver exceptional service.

Alongside the SRA principles, accreditation with the CQS (conveyancing quality scheme) is one of the most effective ways to limit the likelihood of a negligence claim, no matter how small. It’s a clear sign that yours is a reputable firm that takes its obligations seriously, so insurers are willing to provide cover.

Since accreditation involves mandatory training, it’s worth thinking about how you can make the most of approved online courses to bring the content to life and ensure it sticks. What’s important is that compliance training isn’t seen as a tick-box exercise, but an opportunity for staff to genuinely understand how the regulations protect clients and firms, and then apply their knowledge to every case.

As well as training, the CQS stresses the importance of standardised processes to highlight risks and address them, swiftly and effectively. One way to achieve this is by automating routine conveyancing tasks to create consistency and limit the scope for human error, poor judgement and negligence. It also alleviates some of the time pressures that might stand in the way of solicitors taking on more cases or engaging in training to bolster their expertise.

A good law firm recognises where the risks lie and how they might change over time – for instance, the cyber-security risks associated with working from home. They also keep detailed records of everything they do on every client’s file because insurers and regulators work on the basis that unless something is written down, it didn’t happen.

You’re less likely to face action for regulatory breaches and claims for negligence if you take a disciplined approach to case management, with standardised workflows and automated reminders to ensure nothing is missed. Growing numbers of firms use cloud-based systems for accuracy, transparency and consistency, storing all information and documents relating to a case in a central secure location.

Complaints and claims often arise when firms fail to act when they should or when instructed to by a client. All undertakings must be closely monitored and acted upon too, or else clients may take you to court to enforce them. Failure to comply with undertakings invariably leads to CQS accreditations being withdrawn and is a red flag for insurers, especially given their current appetite for risk.

When it comes to renewals, one expert from Lockton urges firms to start the process early and provide a comprehensive and high-quality presentation since you’re competing against as many as 5,000 other firms for the attention of the underwriter. All information should be presented in a professional not piecemeal way, and any claims summarised with the steps you’ve taken to mitigate future ones. I’d also add that when this information is accurate and easy to retrieve, you can make the renewals process more efficient and boost your chances of getting a competitive quote.

No matter how busy a firm becomes – and property transactions have risen exponentially over the past year – there is no excuse for negligence and poor practice. Firms will need the right systems in place to deliver training efficiently and effectively, follow due diligence procedures and comply with undertakings. These systems should also help to monitor and mitigate both financial and security risks, as well as make the renewals process less painful.

With a concerted industry-wide effort to make compliance a priority and drive down claims, we can give insurers a real incentive to provide competitive cover to law firms who want to grow their conveyancing services.

To find out more about how Access Legal compliance and conveyancing software can help your firm, visit

Jennifer van Deursen

Jen is the Senior Media Officer for Today’s Conveyancer, Today’s Wills & Probate  and Today’s Family Lawyer.

Having gained a degree in Multimedia Computing, Jen fell into a content role after successfully applying for a job at Cheshire Police. During her 6-year service, she took on the role as personal Press Officer under the first Police and Crime Commissioner for Cheshire and worked in the busy press office for the force.

Jen has experience in the marketing and communication sphere, which stems from her time in the public sector, private care sector and now here at the Practical Vision Network, where she can utilise her skills and challenge herself further.

Leave a Reply

Your email address will not be published.