October 2022 PII Renewals: Are you covered?
When interest rates are high, many insurance companies write for volume so they can earn decent returns from their savings. Insurance cycles usually work in peaks and troughs, and are influenced by interest rates.
Some newly established insurers are offering to cover solicitor's firm's in the near future bringing with it more capacity and a little more rate competitiveness, which it is hoped will create more favourable premiums.
There is no doubt though that the current pricing structure for solicitors' professional indemnity insurance (PII) is not sustainable and will eventually have to be corrected downward.
The broking market is, to a degree, sharing in the pain of law firms because at least two insurers with significant market share have reduced their 15% commissions provided to brokers on solicitors' business to 5%. Several companies charge additional fees, which is acceptable as long as they are transparent.
It has been very difficult for insurers to make a profit writing solicitors' PII in recent years - most do it as part of a broader portfolio of products tailored to the professions in general, where solicitors are included due to the high premiums per firm.
With economic headwinds set to intensify, some firms will be doing less well this time next year. PII premiums may not be able to be reduced in the short-term since insurers actually prefer lower risks with higher premiums - so they will probably hold their ground on rates. Consequently, even if your income decreases next year, the rate calculating the premium may still rise.
Due to public safety concerns, the Solicitors Regulation Authority has set some of the broadest PII terms and conditions available in the UK insurance market. To ensure that coverage is maintained, however, there are a few housekeeping rules that should be followed. Ask your broker for clarification if you are uncertain.
Advice to firms who don't get a policy offer before 1 October is to stick with it, since an insurer does not want to end up stuck with a law firm that goes into runoff, without any idea what might transpire in the next six years. You may get somewhere if you continue to haggle however here is an economic limit to how much an insurer can spend in order to keep a law firm from going under.
Insurers can see how law firms are improving their risk profile by using the analytics provided these days by a number of good legal tech companies, which allows them to demonstrate security and compliance in their client activity. Insurers are increasingly seeking to recover excesses from partners and directors of closed firms. Consequently, the Solicitors Indemnity Fund will have to remain the focus, which supports claims beyond the six-year runoff period.
In this season, there are opportunities for law firms to absorb those that are struggling to obtain cover for reasons unrelated to the quality of their work and those who decide to shut down because their renewal terms are the straw that breaks the camel's back. Opportunity does exist, but it requires speed and due diligence within a limited time frame.
If you need advice or a free quote, Legal Ex Plus are specialists in Solicitor’s Professional Indemnity Insurance. Their experienced team can provide all the advice you need, bespoke cover and competitive pricing for firms of all sizes, you can start your free quote by calling 0800 180 4203 today or visit legalexplus.com to find out more.
