In a difficult professional indemnity market for solicitors, headlines in the legal and insurance press can be demoralizing, constantly reminding lawyers that we are experiencing the hardest market in recent years for this PI insurance.
In addition to the financial pressures from increased premiums, law firms are dealing with the practical, professional and financial effects of the global pandemic. However it is worth taking a broader perspective on the matter of renewals, namely that there remains a solid pool of A Rated insurers available for primary cover despite the insurance industry’s reduced appetite for new business.
These recent premium increases follow years of stable rates and it is not only solicitors PII that is on the rise, many other professions have also been experiencing significant hikes in premiums, along with reductions in the scope of coverage. Plus, in the past, insurance markets have been cyclical therefore it is reasonable to expect that the market will eventually stabilise with an expectation that rates will become more competitive wen capacity and appetite improves.
For most law firms the real question is what they should expect when their next insurance renewal rolls around and whether they should worry about not getting covered at all. It is important for firms to consult with their brokers before making a decision about their insurance coverage. Participating insurers will likely continue offering primary coverage to law firms they insure currently, provided their risk profile remains satisfactory.
For the upcoming October renewal, firms can expect rates to increase. Although, the figure will differ from one firm to another, depending on the rate requirements of each insurer, the areas of work undertaken, the history of claims, how the underwriter views the risk of future claims.
A firm should not depend on ‘averages’ estimated in the legal press, as that can lead to either under preparedness or over-stress. The best approach to renewal should be based on advice specifically tailored to the business’s needs and profile, then aligned with the broker.
Firms that have experienced a significant increase in conveyancing transactions due to the SDLT holiday, might find it useful to tackle this issue head-on in the documentation submitted to insurers at renewal. You should consider detailing any processes or procedures that were put in place to manage and respond to the increased workload and associated risks and explain why you do not expect the increased activity to result in additional claims for your firm.
Firms can also identify other concerns insurers have by reviewing the proposal form. The majority of questions on proposal forms and pandemic-related questionnaires are based on claims activity that insurers have experienced or anticipate. Taking the risk perspective into consideration, you should think about what actions you can take if you can’t answer the questions in a way that will reassure underwriters.
Despite the profession generally weathering the storm created by the pandemic better than expected from a financial perspective, insurers are equally mindful of the uncertain economic outlook and the high number of firms that will have to repay loans and meet deferred VAT. Over the past 12 months, insurers have consistently applied rigor to reviewing the financial statements of firms therefore it is imperative to explain how you are tackling any issues that don’t look good, with realistic plans and forecasts.
If you haven’t already, contact a broker today. You can discuss timeframes for submitting your proposal form in addition to what to expect in terms of premiums. You might be surprised at how detailed the documentation for renewal is, which can take a long time to gather. It would be a mistake to leave matters to the last minute this year as there may be a risk of missing out on available capacity.
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