Missed your PII renewal deadline - what next?

Depending when you’re reading this, the 1st of October ‘common renewal date’ for professional indemnity insurance (PII) has now passed. The hardening market, and additional challenges introduced by Covid-19, mean that a number of firms are still in the process of renewing their (PII) renewal. Delays for some firms has been exacerbated by:

• longer proposal forms
• additional business resilience linked questionnaires
• reduced underwriter capacity
• a lower appetite for new business
• generally speaking, a longer turnaround time for renewal and new business quotes as a result of the continued ‘remote’ insurance market

All of this has been further complicated by the legal sector having to focus their efforts on keeping businesses running, meaning that PII has slipped to the back of the queue.

There are some actions your firm should consider if they find themselves in the Extended Policy Period (EPP), which prior to the introduction of the SRA’s new Standards and Regulations in November 2019, was known as the Extended Indemnity Period (EIP).

So, what is the EPP? Essentially, it’s a period of cover for firms that have not been able to renew their PII before expiry. Cover continues to be provided by your existing insurer and your firm can continue to operate ‘business as usual’ for 30 days. If you still do not have new insurance at the end of the 30-day period then you move into the ‘Cessation Period’ (CP).

The CP is a 60-day period during which your insurer will again continue to cover the firm. In the CP, the firm cannot accept any new instructions, but you can continue to work on existing files as you prepare to close the firm at the end of the 60 days, in the event that you are still unable to secure new PII.

In approaching new prospective insurers the firm should consider the following:

1. Take time to consider how you use the EPP

While it might feel like the only option is to send your proposal form blindly into the market, this is unlikely to yield positive results. Gather all those responsible for managing the firm’s PII and come up with a logical course of action.

Understand which brokers/insurers have already been approached and who you can still speak to, taking into account insurers with exclusive agreements (which may have meant your broker was unable to access them initially).

2. Consider why you are in the EPP

Ensure your broker gives you a comprehensive understanding of why the firm was not offered renewal terms from their incumbent insurer. This will be the first question a prospective underwriter asks. Also

• did you not initially seek alternative terms?
• has your insurers’ ‘underwriting appetite’ changed?
• have there been some large losses?
• were you simply focused on keeping the practice running?

Whatever the reasons, provide your broker and underwriter with a detailed explanation. Again, underwriters will be wary of firms in the EPP and telling them that ‘your broker was not able to find terms’ will not entice them to consider offering cover late in the day.

3. The market has changed 

At this point you will be fed up of hearing this but the reason it keeps being repeated is because it is true. Insurers have suffered significant losses writing solicitors’ PII over the last 10 years largely due to pricing competition.

Do not ignore your current quote because your premium has increased. Electing to go into the EPP because you are dissatisfied with your renewal terms is a dangerous route to go down. Remember, insurers have the right to withdraw terms.

Some firms are considering electing to move into the EPP in an effort to find 18 or 24-month term polices. Insurers, broadly speaking, are not offering policies of more than 12 months this year due to the continued reallocation of capacity, rate increases, and the enormous uncertainty around covid-19. Longer term policies will return in due course, but do not jeopardise your firm’s renewal this year searching for unicorns!

4. Complete a thorough submission

If you are in the EPP and approaching new insurers you must submit a full submission presentation. This must include:

• a full proposal form (signed and dated)
• a business resilience/covid-19 questionnaire
• ten years up-to-date claims (generated no more than two months before renewal date) and a full explanation of any past claims and circumstances
• the most recently submitted reports and accounts
• any additional pertinent information – changes to fees, fee earners, status, work types, mergers or acquisitions, SRA investigations etc

You should work off the following premise—if an underwriter has to ask for additional information then they will not offer the firm terms.

Summary

An underwriter will always be wary of a firm in the EPP. Rushing to get terms without preparation will be detrimental to what you are trying to achieve. Take a morning to gather the partners and anyone else responsible for the firm’s PII.

Consider your renewal presentation and the reasons why you were not offered terms from your insurer.

Remember, insurers are short of capacity and typically do not jump to offer terms to firms in the EPP. Give them an excuse to offer terms, not a reason to say no.