For many firms, solicitors’ professional indemnity insurance (PII) is a “set it and forget it”-type of activity. They understand they need coverage, but they’re far from thrilled about the process of scouring providers to find the best deal.
That’s especially true when you consider the current professional indemnity insurance market.
Surging premiums, an absence of new insurance providers, and a perception that existing providers’ have a decreased appetite to take on new clients has led many law firms to become stressed at the idea of applying for or renewing their professional indemnity insurance.
However, according to Frances Lodge, Assistant Vice-President of Lockton Solicitors UK, who recently spoke to leading legaltech platform Clio about the topic, there is some good news and practical steps firms can take that will reduce stress and potentially the costs of PII.
This article draws from Frances’s interview, outlining the current state of the market before highlighting why firms should still remain optimistic—and the steps they can take to reduce their PII costs and application/renewal stress.
Market conditions for professional indemnity insurance
Frances told Clio:
“In recent times we have seen some of the toughest market conditions, with premium rates increasing consistently. With an absence of new insurers entering the market, and a reduced appetite for insurers to take on new clients, choice for some firms at their renewal has been limited.
However, we are now starting to see some green shoots in the market, with insurers more willing to take on new clients, and rate increases beginning to plateau.”
That said, these are far from the only factors to have rocked the market.
A costly policy, even at the best of times
Most lawyers will be aware that solicitors’ PII policies can be costly (especially compared to other professions). This is the case for a number of reasons. Consider that it’s the only policy where insurers must provide run-off cover, even when it hasn’t been paid for. While these costs are nothing new, it’s worth highlighting that seeking solicitors’ professional indemnity insurance coverage can be an expensive endeavour at the best of times.
Claims are surging
PII claims are increasing in both their frequency and severity, given that asset and transaction values continue to rise. Clio reports that while roughly two-thirds of firms aren’t experiencing claims, those from the remaining third now exceed the total premium that insurers collect from the entire profession. Unfortunately, this means that firms that have done little wrong have to stump up additional costs to prop up the market.
Why there’s still room for optimism
Fortunately, it’s not all doom and gloom. As Frances explains, the market for solicitors’ professional indemnity insurance is cyclical, meaning the market will again soften—though nobody quite knows when. Frances points out that insurers are slowly becoming more willing to take on new clients compared to 12 months ago, so that’s certainly a positive sign. What’s more, fee increases have also started to plateau.
It’s worth also mentioning that certain sectors have largely been shielded from these stormy market conditions. For instance, firms with good histories that undertake what’s deemed to be low-risk work, such as specialist criminal or employee law, have been left comparatively unscathed.
How can firms reduce their PII premium?
While the market as a whole is not entirely within firms’ control, there are certain measures law firms and solicitors can take to minimise the market’s impact on their PII premium.
Invest in legaltech solutions
Today’s Conveyancer reports that approximately 40% of firms who have adopted legaltech solutions have received a discount on their professional indemnity insurance as a result.
But why, exactly?
Leading legaltech platforms increase efficiency, reduce pressure on solicitors, and create robust firm-wide processes. This leads to fewer mistakes—and, therefore, fewer PII claims. Solicitors, their clients, and their insurers are happy. Everybody wins.
Re-examine existing processes
Of course, implementing legaltech is far from the only recourse for firms to turn to. Firms should also re-examine their risk management processes to identify potential risk areas that might leave them vulnerable moving forward.
It’s easy for firms to get used to processes they’ve relied on for years. However, no matter how well-embedded these processes are, it’s crucial to take a step back and analyse whether they could be improved upon—and if so, how. Don’t become complacent and believe that if a method’s worked in the past, it’ll work again in the future.
For more details on creating an effective process for applying for or renewing solicitors’ professional indemnity insurance, reference this free PII guide.
Prioritise staff wellbeing
Stressed-out, overworked employees are more likely to make mistakes. That’s a no-brainer. Therefore, by promoting wellbeing initiatives, checking in regularly with employees, providing training, and encouraging continual professional development (CPD), managers can ensure their staff turns up every day ready to produce the highest quality of work.
The legal sector has traditionally worked long hours. For some firms, long working hours can become almost a source of pride and create a toxic law firm culture. However, if you want to lower your professional indemnity insurance quote, neglecting your firm’s staff wellbeing could be a costly mistake, as Frances pointed out:
“The importance of staff wellbeing has come to the fore in recent times… with a common cause of claim being overworked staff who, under pressure, make uncharacteristic errors.”
Prioritising staff health and wellbeing is a way to manage this risk.
Learn how to write clear, comprehensive proposals
The quality of a firm’s proposal will make a huge impact on the underwriting outcome. As Frances explained:
“With underwriters receiving thousands of applications for PII at each key renewal date, the quality of a firm’s presentation can make a significant difference to the underwriting outcome. A clear and comprehensive proposal, in good time before renewal, together with a bespoke covering letter will stand out to insurers.”
Here are some tips for writing a winning proposal.
1. Cut the legalese
Make it as easy as possible for underwriters to read and understand what you’re saying.
2. Provide a bespoke cover letter
Stand out from the crowd. Provide key details regarding your typical client base, internal risk management processes, and how your firm continually maintains its high operating standards. Better still, go one step further by outlining the challenges that lie ahead for your firm (and how you plan on dealing with them).
3. Deepen your understanding of the PII market
Ensure you know precisely what insurers are looking for from firms, why, and how you can demonstrate these qualities. Read over detailed solicitors’ PII guides, such as Clio’s free resource, “A Guide to Solicitors’ Professional Indemnity Insurance”, which was produced and reviewed in partnership with Lockton, to get up to speed as easily as possible.
Be proactive, not reactive
The market for solicitors’ professional indemnity insurance is going through a tough spell. However, that doesn’t mean firms should simply sit back and hope it passes. They must instead take proactive steps to reduce their premiums, ensuring they submit clear, comprehensive proposals and constantly looking to improve their internal processes and technology. By doing so, they’ll drastically increase their chances of acquiring a more affordable PII policy that doesn’t break the bank.
This article was submitted to be published by Clio 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.