Solicitors' professional indemnity insurance (PII) is one of the top three overheads for most law firms. We've put together this guide with some tips on how to prepare for your renewal to give you the confidence that you have got the best terms for your business.
1. Preparation is key
Start the process early
- We appreciate that this is 'easier said than done'. An early start does mean you have more time to collate information, complete the proposal in bite sized chunks and react to any unforeseen circumstances
Communicate with your broker
- Ahead of renewal, your broker should advise you on what you should expect. If not, ask them. Agree deadlines with them around timeframes for matters such as proposal issue and production of renewal terms. And ensure that where possible, these are met
2. Collate all your information
The proposal form
- We know how much you like completing these! However, this is a key component of the process and the information contained in the document forms part of an insurer's view of your risk. Try to allocate the necessary time to complete the proposal and don't rush it. Answer all questions fully, supplying as much information as possible and don't attempt to conceal anything
3. Obtain alternative quotations
What are your expectations?
- When entering the quotation process, have a clear expectation of what you're trying to achieve. Insurers will gravitate towards risks that they believe have a strong chance of winning. Be clear that you're prepared to move insurer for the right deal and that any exercise undertaken is not necessarily 'something that you do every year', without changing your PII provider
- When selecting an alternative broker to provide quotations, understand what that broker can provide you with not just at quotation time. Your PII premium is a significant spend, so why should your broker leave you 'drifting in the wind' for 9 months? What is their approach to claims? Do they leave this to the insurer and their panel solicitors? A broker should be more hands on, representing you in these circumstances, and if necessary giving you access to third party experts should a situation become contentious
Don't ask too many brokers to quote
- Asking multiple brokers to quote can have the opposite effect in terms of getting the best market response. Insurers that receive multiple requests for quotations are more likely to decline to put forward terms, as they see this as an argument that they cannot win
Some brokers are tied to certain insurers via bespoke schemes and any quotation that you receive from them is likely to be from these tied markets. Other brokers will be independent meaning that they can access most of the available market outside of the bespoke schemes.
Therefore, in order to get a whole market response, we would recommend engaging with an independent broker and brokers that have bespoke schemes.
Consider a nominated market exercise
- If using more than one independent broker, who will essentially have access to the same markets, we would recommend considering a nominated market exercise. This is where you allocate the available markets between each broker. This ensures that you receive total market response and avoid multiple requests to the same insurers and potential 'market blocking'
Do I have to complete another proposal?
- No. Most Insurers will accept the completed proposal form from your current insurer/broker
4. Understand the key rating factors
Insurers will consider a number of factors when providing quotations. Some of these factors are detailed below together with some pointers:
- This will determine an insurer's appetite as some will specialise in the less than four Partner space and others in the more than four Partner space
- Be as accurate as possible in declaring fee income. If there have been significant changes in fee income (either up or down), provide the reasons for this with your presentation
Areas of practice
- Areas such as conveyancing and personal injury are classed as high risk areas by insurers whereas areas such as criminal and family are considered low risk. Therefore it's important to accurately reflect your areas of practice as this will have an effect on your premium. If you do work in a high risk area, you're NOT without choice of Insurer. For example, in respect of conveyancing, there is only one insurer with a 'zero tolerance' approach, whereas others will have percentage thresholds
- Prior to quotation, insurers will want to see at least five years updated confirmed claims information. An Insurer is not necessarily going to be turned off by the fact that you have had claims. They are interested in the circumstances of the claim and procedural changes you have made since to prevent a recurrence
- It's important to demonstrate that Risk Management is embedded within the culture of the firm. It's a myth that having accreditations such as Lexcel, CQS, IIP etc automatically means lower PII premiums, but what it does demonstrate to insurers is that the firm is working towards a best practice standard
5. Evaluate the market conditions
Before you begin the renewal quotations process, your broker should discuss the market conditions with you. Some of these are:
- 2016 saw the exit of the remaining unrated insurers. Therefore, the current participating insurers are all A rated and will satisfy the requirements of lender panels etc removing a major concern for most firms
The market is soft
- Current market conditions are soft meaning that there is a lot of available insurer capacity. For risks with a good claims history that can demonstrate strong management controls, there are definitely competitive deals to be had
- More insurers are looking to offer early renewal to their clients. An offer of level rates and concluding renewal well before the renewal date might seem like a good deal. However, with soft market conditions prevailing at the moment, is it such a good deal? Now might be an opportune time to take a step back and look at what the rest of the market has to offer, to ensure that you're not leaving money on the table
- With firms no longer tied to the traditional 1 October renewal date you have the option to move renewal to a more convenient time for your firm. Most insurers are willing to offer extended period policies, so now may be a good time to consider this, bearing in mind the competitive nature of premiums.
Understanding your PII regulatory requirements practice note
Our PII helpline for members: call 020 7320 9545 email@example.com
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