PII buyers' guide

We want to help solicitors to make informed choices when purchasing professional indemnity insurance (PII) and to use the market effectively.

Most firms rely on brokers when making what is a complex and costly purchasing decision. A broker should provide tailored advice on the suitability or otherwise for your firm of accepting a quotation from a particular insurer.

This guide can help you to:

  • get the most out of broker services so that brokers provide a level of service that meets your needs
  • make an informed choice when considering quotations from insurers
  • consider questions to put to your broker

In the past, we were concerned about the number of solicitors relying on unrated insurers. In the 2012/13 renewal, 16% of firms used unrated insurers for their PII cover.

In the 2013/14 renewal, although the number of unrated insurers active in this market fell from five to three, two unrated insurers accounted for 22% of firms’ PII, most of which were small practices with one to four partners.

For more information, see our annual PII surveys of solicitors’ renewal experiences.

Several of these unrated insurers subsequently collapsed, causing great difficulties for their clients.

More recently, none of the SRA’s participating insurers have been unrated, but with a return to a hard market (in which the cost of premiums is increasing, while market capacity is reducing) unrated insurers may be tempted back.

Your broker should be able to offer advice on an insurer’s financial security.

Although we understand the economic pressures on firms, it’s important to not make PII purchasing decisions based on price alone.

Critically, you should also consider the financial stability of insurers and their rating.

You’re purchasing a claims service, so you need to consider carefully whether that service and the support you will need will be there for you in the event of a claim being made against your firm.

Do not forget the historic claims-made basis of your PII policy. We have guidance to help you understand the consequences if your insurer is unable to meet its long-term obligations.

For a list of the insurers providing solicitors’ PII, refer to the Solicitors Regulation Authority’s (SRA) list of participating insurers.

Understanding the PII market

It’s important to understand the different relationships within the PII market and understand who you’re dealing with in the intermediary chain.

Solicitors may deal directly with any of the entities listed below and may enter into a contract with an insurer via any of these routes.

In reality, most solicitors rely on brokers to help them and most insurers only sell policies through a broker.

An insurance contract between solicitor and insurer

Insurance brokers

Insurance brokers advise on and arrange insurance. They act as the agent of you, the insured.

Brokers have a duty to help to arrange PII cover for their clients and produce the best possible insurance solution for you – not for the insurer.

A broker or any other intermediary can only give advice on insurance matters if they’re authorised by the Financial Conduct Authority (FCA) either directly or as an appointed representative of another regulated firm.

Different brokers provide different types of services.

While some brokers perform underwriting functions on behalf of an insurer (see underwriting agents), the two should not be confused. The insurance contract is between the solicitor and the insurer – not the broker.

Brokers without an underwriting agency are unable to bind business for an insurer, but instead must secure coverage from the insurer or underwriter, which is then passed on to you.

Sub-brokers

Sub-brokers may ‘sub-broke’ to a larger or more specialist PII broker(s) with tied arrangements with insurers.

Sub-brokers are another layer in the ‘intermediary chain’ between you and the insurer or underwriter.

Sometimes sub-broking is necessary because of the tied arrangements that exist within the solicitors’ PII market.

Each part of the sub-broking chain is likely to charge commission or fees.

Underwriting agents

Underwriting agents provide PII underwriting expertise to insurers. They act as an agent for insurers – not you.

This is sometimes described as ‘holding the pen’, which means that as a representative of the insurance company, agents may be given the ability to bind the insurer to certain obligations.

For example, an insured may receive a binder of insurance that effects coverage immediately from an underwriting agent. While underwriting agents may have the authority to bind business, they do not carry any of the actual PII risk.

Managing general agents (MGA)

MGAs are a type of underwriting agency where the agent is provided with significant authority to underwrite and bind coverage on behalf of the insurer they represent.

MGAs serve an important function for insurers who do not maintain internal staff with the necessary technical expertise or administrative infrastructure to complete traditional insurance company tasks.

Sometimes referred to as ‘wholesalers’, MGAs are not brokers. They can either be accessed directly or via a broker/sub-broker.

Insurers

Insurers provide a transfer of risk in exchange for an insurance premium in accordance with the terms of the insurance policy.

Insurers are private companies seeking to maximise profits for the benefit of shareholders. They can either be accessed directly or via a broker/sub-broker.

Participating insurers

Participating insurers are authorised by the FCA to conduct general insurance business in the UK and have signed the SRA’s participating insurer’s agreement (PIA).

The PIA is a contract that’s entered into each year, which requires insurers to offer solicitors’ PII policies. This is the only requirement that the SRA places on insurers.

The SRA does not currently carry out solvency checks on insurers and does not require a minimum level of financial security for participating in the solicitors’ PII market.

How do I search for a broker?

There are several useful resources available to you when searching for a suitable broker.

You should also refer to questions to ask section of this guide to make sure that you’re asking the right questions of any prospective broker.

FCA register

The FCA register is a public record of all the firms, individuals and other bodies that are regulated by the FCA, including professional indemnity insurance brokers.

You can search the FCA register for information on all brokers that are authorised by the FCA and provide products or services in the UK.

The British Insurance Brokers’ Association (BIBA) is a general insurance organisation representing the interests of insurance brokers, intermediaries and their customers.

To search for brokers on BIBA’s website, enter your postcode and select the following ‘insurance type’ options:

  • in the first box, select ‘indemnity – commercial’
  • in the second box, select ‘professional indemnity – solicitors’

This will narrow your search to brokers that provide solicitors’ PII services in your postal area.

Other directories

There are other online directories available, some of which may focus specifically on solicitors’ PII.

Before using these websites, you may want to make further enquiries to determine how they assess the level of expertise of brokers.

Warning

Online directories may list ‘specialist’ PII brokers. Some sites will charge you a fee.

We recommend careful enquiry about the process these websites use to vet brokers on the list to determine their level of expertise and quality of service. You should also ask if the brokers pay to be featured in the list.

Do I need a broker?

This is an individual business decision that you should make, taking into account all of your firm’s circumstances.

If you consider that you’re not getting the most out of your current broker, then you may want to consider using another broker or seeking out insurers or underwriting agents that allow direct access.

We understand that many solicitors have built up a long-standing relationship with their existing broker. This relationship can be beneficial if it means that your broker has insight into:

  • how your firm is run
  • its risk management practices
  • its claims history

A specialist PII broker will be able to use this knowledge and experience to your advantage by presenting your firm in a way that demonstrates to insurers that your firm represents a ‘good’ risk.

You should also consider the effect that changing your broker may have on your ability to access insurers.

If your current broker provides you with access to your existing insurer that you may not be able to access through another broker, you should consider the benefits that continuity of insurer can provide: for example, avoidance of coverage disputes that may arise between insurers in different policy years. See questions to ask and considering offers.

Remember that the market is changing. You should make sure that any broker that you use will be in a position to advise you of the changes and to conduct a full market exercise for your firm.

Your access to the market

You should ask enough questions to determine whether a broker (or an intermediary) is able to access insurers that are prepared to offer appropriate cover to your firm type and size.

By asking these questions, you may realise that you need to use a different broker or a different part of the intermediary chain to gain access to a wider range of insurers.

If you’re using a broker, you should know whether they’ll provide an execution-only service or an advisory service.

Under FCA regulations, before the conclusion of an initial contract of insurance, a broker must advise you as to whether it’s either:

  • under a contractual obligation to conduct business exclusively with one or more insurers
  • not under a contractual obligation to conduct business exclusively with one or more insurers but does not give advice on the basis of a fair analysis of the market

We recommend that you ask these questions before you decide whether or not to instruct a broker, so that you fully understand which insurers they’ll be approaching on your behalf.

Read more about questions to ask your broker

Which insurers are prepared to offer cover to your firm?

You should ask a broker if they’ll give you advice about which insurers to approach that are suitable for your firm based on a fair analysis of the market.

It’s important that you understand in advance which insurers a broker will be able to approach on your behalf and if they have any tied arrangements.

Which insurers can your broker approach?

You should carefully consider the level of access to insurers that any prospective broker has.

While some brokers deal directly with several different providers so that they can best cater for all firm types and sizes, some have a commercial agreement with a single insurer known as a ‘tied arrangement’ (exclusivity).

Tied arrangements

Some brokers have a tied commercial agreement with a single insurer for certain segments of the profession. This may mean that the broker can place business with only one insurer.

It may also mean that the broker is the only one that’s able to place business or certain types of business for that insurer.

If that’s the case, and another broker wants to place business with that insurer, it will more than likely have to ‘sub-broke’ through the tied broker. This may have increased cost implications for you.

Using multiple brokers

Large firms are usually able to get insurance with the assistance of a single broker.

However, due to tied arrangements that exist between some brokers and insurers at the smaller end of the market, smaller firms may need to approach multiple brokers to access the full range of insurers willing to offer PII to their firm.

You should not need to approach more than three brokers to ensure adequate access.

Warning

If you use multiple brokers, you should make sure that your proposal form does not go to the same insurer more than once. This could result in counter-productive negotiations and slow down the entire process.

Many insurers work on a ‘first-come, first-served’ basis and there’s a danger that a scattergun approach to proposal forms without proper vetting of the information sent on will result in a declinature and reduce your chance of getting insurance.

What service are you getting from a broker?

Brokers offer different levels of service to clients.

Execution-only brokers do not advise you on the market or how best to present your firm to insurers: they will only place your cover. They’re also often tied to a particular insurer.

If you’re paying a broker to perform an advisory role, they should give you independent professional advice and assistance in preparing the best package to send to an insurer, as well as telling you if you should contact any other brokers in order to access the entire market.

An advisory broker may also inform you about market conditions and advise you about how best to apply for PII or about making significant changes to your business (for example, restructuring).

Brokers have a duty to inform you of such limitations. However, you should seek clarification from a broker if you’re unsure about any of these relationships.

Be aware that some advisory brokers may still be tied exclusively to one or more insurers. You may have to instruct other brokers on an execution-only basis to access the full market.

How experienced is a broker in dealing with the solicitors’ PII market?

Specialist PII brokers have expertise in solicitors’ PII and may offer a ‘complete’ advisory service depending on your requirements and based on the size of your firm.

You should consider whether a broker is a specialist in the solicitors’ PII market.

PII is a specialist area of general insurance and not all PII brokers are experienced in the solicitors’ PII market. You should therefore make sure that you engage a sufficiently experienced broker.

To find out about a broker’s level of experience, you should ask enough questions to determine whether they’re right for your firm size and type.

What type of advisory service should you expect from a broker?

You should be able to request some or all of the following from brokers who provide an advisory role in helping to organise you cover, depending on the size of firm and your individual requirements:

  • information about market conditions
  • advice on the types and level of insurance cover that may be required for your firm
  • assistance in deciding on the appropriate level of PII for your firm (including whether you should consider purchasing cover above the minimum terms and conditions)
  • cost of run-off cover – should retirement be an option you’re seriously considering
  • advice on how best to present the information in your proposal form
  • an evaluation of existing standards of loss control and advice on risk management measures that will positively influence insurers’ view of your firm
  • the broker discussing your proposal directly with the insurers/underwriters
  • assistance in getting your insurers’ claims summary that details any existing claims or notifications
  • provision of details of the insurers approached and quotes received
  • provision of information relating to the reputation, suitability and solvency of possible insurers
  • advice on whether to accept an offer for PII (see considering offers and our practice note)
  • a visit to your office to help the broker understand your business and risks (usually for medium/large size firms only
  • make sure that the following is undertaken in good:
    • pursue the insurer to ensure prompt issue of policies
    • make sure that all documents are sent to the insurers and to you
    • issue you with renewal notices and reminders
  • advice on your retention of insurance documents and keeping all relevant records relating to your insurance arrangement
  • support during the indemnity period if you have to make a claim or notify circumstances to your insurer – some brokers may even provide claims handling and management that monitors claims activity and pursue claims recoveries on your behalf

The type of service that a broker provides may affect the fee they charge. Some brokers will limit availability of certain services based on firm size.

However, the standard of service you receive from a broker should not depend on the size of your firm, whether they receive a commission from your insurer or charge you a direct fee. For more information, see the section on understanding the costs.

Note

A broker has a duty to work for you under agency and contract law. The FCA requires brokers to pay due regard to the interests of its customers and treat them fairly.

While your broker is not bound to provide any of the above services, the terms of business that you enter into with a broker is a contract between you and your broker.

It may be advantageous for you to agree, as part of these terms, that your broker will perform some or all of the above advisory services.

Understanding the costs

Paying your premium

Most insurers will require you to pay the whole premium before they will confirm cover.

You may be able to pay your premium by instalments or obtain finance to pay your premium. You should make sure that these arrangements are in place before the policy comes into effect.

If you’re dealing with an intermediary, you should ask if they offer a premium financing service that will allow you to spread payment of the premium across the year or approach your insurer directly to negotiate payment options.

Alternatively, you may be able to obtain finance from a premium finance company and pay off the loan by instalments.

For more information about how premiums are calculated, see our practice note on PII.

Run-off costs

If a firm ceases without a successor practice, the SRA requires insurers to provide six years’ run-off cover in accordance with the minimum terms and conditions. This will cover claims made against a business after it closes.

Insurers typically charge between 200% and 300% of your annual premium in run-off premium, although our previous PII surveys have reported instances of 600% being quoted.

You should ask what the insurer charges for run-off premium, even if you’re not considering closing down your practice during the indemnity year. See our guidance on run-off cover.

Extended policy period and cessation period costs

Neither your broker nor your insurer are under an obligation to provide you with renewal terms either now or for future indemnity periods.

The 2012/13 indemnity period was the last time that firms unable to obtain open market insurance were able to enter the assigned risks pool (ARP).

Since 1 October 2013, if you’re unable to get insurance on the open market, your previous insurer will have to provide you with a 30-day extended policy period (EPP), followed by a 60-day cessation period (CP) and then six years of run-off cover.

Some insurers may charge additional premiums for the EPP and you should be aware of the costs of this cover when you obtain PII quotations.

As a response to the circumstance surrounding the 2020 coronavirus pandemic, the SRA have made allowances for firms seeking new cover to negotiate a longer:

  • EPP – allowing them to continue taking on new work for more than 30 days
  • CP – allowing them to carry on with existing work for more than 60 days

These possibilities are explained on the SRA website.

You should also ask what level of premium your insurer will charge if your firm is unable to get insurance at the end of the indemnity year and must enter the EPP.

Insurance premium tax (IPT)

You should ask if the quote includes insurance premium tax (IPT). You should not be charged IPT on any brokers’ fees.

Insurers’ financial security

Financial security of an insurer is crucial, because if an insurer becomes insolvent it may be unable to meet its obligation to pay claims under your insurance policy.

If this occurs, then there may be a high price to pay – you may find yourself without insurance to meet a claim, as well as being in a position of having to pay another premium within four weeks of a mid-indemnity period insolvency event or risk having to close your firm.

You should request information about the financial stability of an insurer before accepting any quote.

An official rating from an independent ratings agency is an important objective measure of an insurer’s financial security; an unrated insurer is an unknown quantity.

You should know what it means if an insurer has any financial or credit rating or is ‘unrated’.

Depending on the level of service they provide and their specialist knowledge, your broker may provide further analysis about:

  • the quality and liquidity of the assets supporting liabilities
  • the reputation of the insurer’s underwriters/managers
  • other general market intel

You should use this information to inform your decision on whether to accept a quote.

Some of the larger brokers have their own financial security committee that forms an assessment of the solvency of an insurer and will prevent that broker from recommending insurers that do not meet relevant criteria.

These committees are likely to have a minimum financial size, solvency ratios and rating criteria that may filter out less stable insurers. This may be more rigorous than the assessment that either the FCA or SRA undertakes.

Fees and commission

We encourage transparency in brokers’ commission and other fee arrangements.

We suggest that you ask your broker how much they charge and what forms of remuneration they will receive from the transaction. You have a right to request this.

If there’s more than one broker involved in the chain in the purchase of your PII, this might increase the amount you pay in total if each broker charges you commission.

Your right to request disclosure

FCA regulations only require brokers to disclose details of the amount of commission they receive from insurers if a client asks them to do so.

Once asked, a broker must disclose all types of remuneration from any arrangements it may have.

Do ask for this information. You should use it to make an informed decision about whether your broker is delivering the level of quality service and value that you would expect for that level of remuneration.

Types of remuneration

Insurance agents and brokers are commonly compensated by the insurer in the form of a commission on the premiums paid to the insurer.

Commissions are generally a specified percentage of the insurance premium generated in each transaction.

Some brokers may also be compensated by a fee arrangement that has been agreed with you that is not driven by the volume of the premium.

Brokers and other intermediaries may be remunerated in any or all of the following ways:

  • commission paid by the insurer
  • fees paid by you (usually in lieu of commission)
  • contingent payments paid by the insurer based on the volume or profitability of the business placed by the broker
  • payment for facilitating premium finance paid by the finance company
  • work transfer or ‘market services commission’ paid by an insurer for services performed by the intermediary on behalf of the insurer – for example, administrative work, presentations, data, premium collection or parts of the underwriting process as an underwriting agent or MGA

Commission

Before you enter into an insurance contract, we recommend that you always ask your broker for full details of their remuneration, including commission they receive, and the total commission received within any intermediary chain.

On your request, a broker must promptly disclose the commission that it and any other intermediary receives in connection with the policy.

Disclosure must be in cash terms and in writing. If this is not possible, the firm must give the basis for calculation.

As a general rule, where the premium is less than £50,000, commission is taken by the broker. As commission forms part of a premium, IPT is applicable.

Other types of commission

Market services commission is variable dependent on the broker in question but will normally add 3% to premium and is in addition to other types of commission or fees.

Where the intermediary has the ability to control and organise the underwriting process on behalf of insurers, this figure may be more.

Where an intermediary receives an enhanced remuneration for a work transfer, this must be disclosed as part of the total remuneration, although the intermediary may choose to break down the total disclosure into standard commission plus the work transfer element.

This type of commission increases the IPT levels and the cost of insurance.

Fees

A fee is negotiated directly with you, the client, for performance of broking services. As this is independent of any premium charge, IPT does not apply.

Brokers are required to provide you with details of the amount of any fees other than premium monies for an insurance mediation activity.

‘Insurance mediation’ means the activities of introducing, proposing or carrying out other work preparatory to the conclusion of contracts of insurance, or of concluding such contracts, or of assisting in the administration and performance of such contracts, in particular in the event of a claim.

For example, arrangements for sharing profits, payments relating to the volume of sales and payments from premium finance companies in connection with arranging finance.

Under FCA regulations, these details must be given before you incur liability to pay the fee, or before conclusion of the contract, whichever is earlier.

We recommend that you ask for disclosure prior to signing the terms of business with the broker, although the ultimate answer may depend on the particular insurer with which the broker places your business.

If the extent of the actual fee cannot be given, a firm must give you details of the basis for its calculation.

Questions to ask

There are a number of areas that you should question when making enquiries with a broker and most certainly before signing any insurance contract.

Questions to test a broker’s eligibility for your firm

  • Are you regulated by the FCA? (you can also check the FCA online register)
  • Are you a broker or a sub-broker for solicitors’ PII?
  • Do you place insurance cover directly with the insurer or do you send it to another broker, underwriting agent or MGA?

Questions to determine cost of cover

  • What premium figure did the insurer quote?
  • If there’s an intermediary chain, what is the total remuneration, including commission, within the chain? What is the percentage or amount of commission charged by each intermediary?

Questions to test a broker’s experience and service

  • Are you a specialist in the solicitors’ PII market?
  • How many years’ experience do you have in placing solicitors’ PII?
  • What percentage of the solicitors’ PII market did you place last year?
  • What percentage of proposal forms did you see?
  • What type(s) and size(s) of firm do you usually look after?
  • Which insurers can you access directly?
  • Is your service ‘advisory and execution’ or ‘execution only’ with no advice?

Considering offers

If you receive multiple offers of insurance, early renewal offers or offers for a policy term which is longer or shorter than the standard 12-month duration, you’ll need to consider which of these is the best offer for your firm. This will not necessarily be the cheapest offer.

There are several factors to consider, including:

  • the financial security of the insurer – financial ratings are listed on the SRA’s participating insurer page
  • any terms/conditions or caveats attached to the offer – for example, acceptance windows or claims amnesty
  • what level of risk you realistically need to cover
  • whether the insurer will be able to provide a quotation later in the renewal and on what terms – most insurers have a limited capacity to write solicitors’ PII and may stop writing business before the renewal deadline. You could also expect the quotation to vary if there’s been a change in your firm’s circumstances later in the renewal period
  • whether there are any other insurers that write firms of your size and type that may be interested in providing you with a quotation later in the renewal season
  • whether the insurer is offering a commitment to renew for future periods
  • the benefits of continuity of insurance for the avoidance of coverage disputes, understanding of your business, claims history and ‘loyalty’ discounts
  • the insurer’s experience, commitment to and likely longevity in the solicitors’ PII market
  • the level of excess payable by you in the event of a claim – you should carefully consider the policy terms of any infill policy that’s designed to cover a large excess to make sure that you understand the scope of the cover
  • the cost of run-off cover
  • the claims handling service and support the insurer provides
  • whether the insurer or broker provides risk management support

Frequently asked questions

Do the SRA or the Law Society approve insurers?

No. Under the internal governance rules that divide responsibilities between the Law Society and the SRA, indemnification is regarded as a regulatory activity, and therefore the Law Society is not permitted to become involved.

The SRA requires participating insurers to sign an agreement to provide solicitors’ PII, but does not vet, approve or regulate them.

This means that there’s no guarantee about the financial integrity of the insurers, but the SRA does require that insurers are transparent about financial security ratings.

Regulation of insurers is undertaken by the Financial Conduct Authority (FCA) or, where an insurer from another jurisdiction is passported into the UK system, the financial regulator of that jurisdiction.

For this reason, you should consider carefully the financial security of your insurer and whether or not the insurer is covered by the Financial Services Compensation Scheme (FSCS).

Do the SRA or the Law Society approve brokers?

No. Brokers are regulated by the FCA and must comply with a number of obligations designed to protect their clients.

The SRA or the Law Society do not vet, approve or regulate brokers.

The SRA has no direct relationship with brokers; rather it enters into an agreement with insurers to ensure that they provide policies in accordance with the minimum terms and conditions in the SRA Indemnity Insurance Rules.

The Law Society does provide a list of major brokers of solicitors’ PII, but the inclusion of brokers on this list should not be regarded as an endorsement, and brokers that are not included may provide good quality service.

See the list of major PII brokers

How many proposal forms should I submit?

It’s never wise to flood the market with proposal forms. However, as outlined above, you may have to submit a form to different insurers/brokers in order to access the full market available to your firm.

If you’re using more than one broker, it’s important to make sure that they do not send multiple forms to the same insurer.

Why is there no common proposal form?

In the past, we’ve worked hard to engage with both insurers and brokers to encourage the development of a common proposal form.

We considered that a common proposal form would assist solicitors and might reduce the number of forms they needed to submit to access the full market.

However, we met with resistance from some parts of the insurance industry and this initiative was dropped.

Divergence between the information requested by different insurers during a hard market makes the introduction of a common proposal form a more distant prospect.

Should I disclose what premium I paid last year if I change brokers?

Many proposal forms ask you to disclose your previous year’s premium.

You’re not under any obligation to disclose this information.

You should be aware that if you disclose the amount you’re currently paying for your PII premium to a potential insurer then it’s likely that it will be considered by the underwriter when providing you with a new quotation.

In a hard market, failing to answer all questions on a proposal form may harm your chances of getting insurance. Ultimately, it’s a decision for you to consider whether to answer this question.

Will the insurer impose any acceptance periods on quotations?

Under FCA regulations, your insurer and broker must take reasonable steps to make sure that you’re given appropriate information about a policy in good time, so that you can make an informed decision about the arrangements proposed.

With most firms still seeking new insurance for the traditional common renewal date of 1 October, a bottleneck can form, so it would be sensible to start looking for cover six to eight weeks ahead of time.

We accept that some deals are necessarily time limited and that some insurers opt to impose acceptance periods of less than 21 days to help make sure that the value of active quotes does not exceed their previous income limit.

Nevertheless, we expect that until this limit is reached or until the time remaining before the renewal deadline makes it impossible, insurers should be willing to reinstate quotes for a further period upon request from a solicitor. This should be without increasing the level of premium, assuming no underlying change in the circumstances underpinning that proposal form.

Several insurers have been prepared to agree to this principle in previous renewals.

We recognise that pressuring solicitors with unreasonable time limits is not a widespread practice and that most of the insurance industry demonstrates a high level of commitment to customer care.

However, we’re concerned that some market participants may unfairly exploit the pressures associated with the old single renewal date for solicitors’ PII.

Contact our Practice Advice Service if you feel unduly pressured by your broker.

You can also make a complaint about your broker.

Can I cancel a policy if I receive a better offer?

This depends on the wording of the offer of insurance from your insurer.

Once you’ve accepted a quotation from an insurer, and the broker communicates this on your behalf, a binding insurance contract is created.

The minimum terms and conditions only allow for cancellation of policies in limited circumstances (clause 4.3).

If you receive a ‘better offer’ after you’ve entered into an insurance contract, you can only cancel a policy with the consent of the insurer.

Any cancellation charges from the insurer to the firm for termination after formal inception will be a feature of the terms of the insurance contract.

Some brokers will charge a ‘cancellation fee’ in these situations for the services that they undertook on your behalf in order to facilitate the initial offer and cover.

A broker is entitled to charge administrative fees to a client in the event that a policy is not formally incepted.

However, any such potential charges or fees must be:

  • clearly stated up front in the brokers’ terms of business,
  • transparent
  • in line with industry guidance on disclosure and clarity

As this is a contractual matter, it’s open to negotiation between you and the broker.

You should ask your broker what, if anything, they charge in these situations.

How do I make a complaint about a broker?

If you have a complaint about the service provided by your broker, you should initially write to them directly before seeking any alternative recourse.

They’re obliged to provide information about their complaints policy prior to the conclusion of the initial contract.

If you’re unhappy with the response, or do not receive a response within eight weeks, you should write to the Financial Ombudsman Service (FOS). The FOS will consider whether the matter falls within its jurisdiction.

Will the Financial Ombudsman Service consider your complaint?

Whether the FOS will consider your complaint will depend upon whether you meet the following criteria:

  • the type of activity to which the complaint relates – the FOS can consider a complaint if the subject matter is deemed a ‘regulated activity’, which includes effecting contracts of insurance (see the FCA’s Handbook)
  • the place where the activity to which the complaint relates was executed – the FOS’ ‘compulsory jurisdiction’ only covers complaints about the activities of a firm carried on from an establishment in the UK, but a complaint can be dealt with by the FOS whether or not you live or are based in the UK
  • whether you’re eligible – ‘private individuals’ and ‘micro-enterprises’ (that employ fewer than 10 people and have an annual turnover of less than €2 million) are eligible: you should also have established a professional relationship with the broker or insurer (see the FCA’s Handbook for more detail on the eligibility criteria)
  • whether your complaint was referred to the FOS in time – the FOS must receive your complaint within six months of the date on which the broker sent its final response (see the FCA’s Handbook for more detail on time limits and exceptions)

What should you do if the FOS will not consider your complaint?

If the FOS considers that your complaint may be out of jurisdiction, it will give you an opportunity to make representations before they make a final decision.

The FOS can also refer your complaint to another complaints scheme where appropriate.

Alternative redress should be made through the courts. A remedy might be sought under the law of agency if you’re seeking redress from a broker who has breached their fiduciary duties.

You may also be able to sue your insurer and/or broker for breach of contract.

PII help, support and resources

Visit our PII hub

Practice Advice Service PII Helpline

Call: 020 7320 9545

Advice on insurer’s financial security

Practice note on insolvency of a participating insurer

PII advice

Practice note on PII – outlines the regulatory requirement to obtain PII and gives an introduction to the application process and market-related issues

Guidance on excess layer/top-up cover – outlines what should be considered when assessing how adequate your PII arrangements are and highlights situations where it may be prudent to purchase excess layer cover above the minimum required by the SRA

Practice note on setting up a practice: regulatory requirements – a guide on the different types of legal practice (from sole practitioner to an alternative business structure) and PII tips for new firms

Renewing your firm’s PII – a guide presented as a series of frequently asked questions, intended to provide basic information for solicitors seeking to renew their PII

Annual survey

PII surveys – see how your firm’s experience measures up with the market trends

Information for firms ceasing to practice or having difficulties

Practice note on closing down your practice: regulatory requirements

Guidance on run-off cover

SRA advice on closing down your practice

Other organisations

You can get further information on brokers and PII in general from the following websites: