The process for renewing Professional Indemnity Insurance (PII) for solicitors is becoming increasingly difficult. Many firms have seen substantial premium increases, and some insurers have been declining to insure solicitors at all resulting a small percentage of law firms being left without cover and having to close as a result.
The traditional renewal date for PII has always been October; however, there is now a ‘secondary renewal season’ in Spring. In October 2020, solicitors experienced the impact of a hard PII market on a significant level due to the impact of Covid-19. The market is showing no real signs of improvement, and as such The Law Society has urged firms to act early in preparation for the 2021 October solicitors PII renewal date.
Why are solicitors facing these PII renewal difficulties?
Both economic uncertainty caused by Brexit and the Covid-19 pandemic have undoubtedly played a major role; however, other influences such as increased claims activity against practices have led to insurers becoming more reluctant to insure solicitors. The factors below are just some of those which are now considered in the risk management process by insurers when making the decision to insure a law firm.
Claim activity against solicitors
Although the number of claims being made against solicitors has not increased drastically, the monetary values for the claims are surging. Whilst the majority of firms are not experiencing any claims against them, the value of the pay-outs for those who are experiencing claims now exceeds the total premium collected by insurers for all solicitors. As the volume of work for some legal sectors, such as conveyancing and contentious probate increases, the risk of high-value claims will also increase, leading to increased risk for insurers.
SRA minimum terms and conditions (MTC)
It could be said that this type of insurance for legal professionals is less profitable and more difficult to underwrite than other types of insurance. The reason for this is due to the SRA MTC, which often acts as a financial guarantee, containing more terms and conditions and a number of exclusions. The broad wording of the MTC may deter new insurers from providing cover for the legal profession.
Cyber-attacks
Cyber-attacks are becoming more and more common in all industries. As solicitors are in possession of high volumes of sensitive client data, claims against law firms for data breaches due to cyber-attacks are likely.
Economic uncertainty
The economic uncertainty caused by Brexit and the pandemic has led to insurers taking a very cautious approach in providing cover for solicitors in all areas. Although the outlook following Brexit is positive, and restrictions are beginning to ease, the economy will be in a fragile state for some time now and insurers will be particularly reluctant to insure those in practice areas that are more susceptible to recessionary losses.
Stamp duty holiday
The stamp duty holiday has had a positive impact on the conveyancing industry. As firms witness increases in conveyancing work, the risk of high-value claims being made against them will also inevitably increase. Furthermore, as deadlines approach, there will be a higher risk of conveyancers rushing their work and making mistakes as a result. Solicitors may also fail to properly inform their clients that they cannot guarantee that the transaction will be completed prior to the deadline.
The outlook for PII Renewals
It is clear that a large proportion of PII insurers have been reluctant over the past few years to insure those working in the legal services industry. It is doubtful that the outlook will change any time soon, and those areas of law which may be deemed as higher risk will face the greatest difficulties. Insurance premiums are likely to increase steadily, and some firms still run the risk of not obtaining cover at all. Insurers now expect a completed covid-related questionnaire as well as a presentation which should include a proposal form and insurer claim summaries.
What should solicitors do to ensure they obtain PII cover?
Solicitors should ensure that they provide a good quality presentation to ensure that their renewal applications are accepted. An insight into your practice should be given, and a supporting note will also be required. You should discuss your plans to mitigate specific risks associated with your practice area within your application.
As recommended by the Law Society, solicitors need to be organised and should prepare and submit their applications months in advance. A large proportion of solicitors do not submit their presentations until the last four weeks leading up to renewal, and others miss the deadline completely.
Legal Ex Plus for Solicitors – how we can help
As the winner of Best Professional Indemnity Insurance Broker (1) two years running, and Professional Indemnity Brokers of the Year 2019 (2) we can arrange cover for your firm. We also provide risk management support to give you the assurance you need throughout the year.
1) AI 2017 & 2018 Legal Awards Winner – Best Professional Indemnity Insurance Broker – UK
2) SME Northern Enterprise Awards 2019 – Professional Indemnity Brokers of the Year 2019
You can benefit from our Professional Indemnity experience, whether you’re a sole practitioner or a large firm you can enjoy:
- Dedicated client managers who are legal sector experts, to help make the PI renewal process as smooth as possible
- Cover provided through “A rated” insurers
- All year-round Risk Management Advice & Support
Call our Solicitors PII team today on 0800 180 4203