Martin MacHale answers four of law firms’ most commonly-asked questions about their professional indemnity insurance renewal
Having spoken to a broad cross-section of law firms across England and Wales about their professional indemnity insurance (PII) renewal, we found that there were a few questions that continued to rise to the surface. Below, we answer the four most commonly-asked questions, to help firms understand their renewal and the changing PII market in more detail.
1. Why is now the right time to test the market?
Over the past 18 months, a number of ‘established’ insurers have left the PII market. A decade of artificially low premiums have resulted in participating insurers re-allocating their underwriting capacity to more profitable classes of business. Like any financial product, PII responds to supply and demand, so as the number of participating insurers reduces, the price increases. As one of the top three overheads for any practice, it is important to ensure your firm’s PII premium remains in line with the wider market. Previously, it has been easier to track your premium, but with rates rising, now is the time to benchmark (see more below).
2. Are there any risks to my firm in testing the market?
PII is an expensive financial product – whether you are renewing your car insurance or your PII, it is entirely reasonable to want to benchmark your terms. Insurers understand this remains the buyer’s prerogative. There is no risk to your firm, as long as you ‘test’ the market in a controlled manner. Allocate underwriters to brokers and ensure you take full advantage of specialist brokers which have exclusive facilities. This will allow you to get terms that would otherwise be unavailable to generalist brokers. Importantly, understand the firm’s ‘route to market’: ask your broker to explain the process and to tell you about additional brokers they use to place your insurance.
3. How should I approach my renewal?
Although it might sound obvious, take your time when filling out the proposal form. This form is the underwriter’s first impression of your firm. Complete it on a computer, not by hand at the end of a long week. Provide the insurers with more information than they request. If the proposal form asks if the firm has procedures in place to deal with escalating ground rents, don’t simply tick ‘yes’. Go the extra mile and explain the measures and processes you have in place. A risk-aware firm that takes the time to present itself well to the market will always attain more competitive terms.
4. Why is it so important to provide my claims history beyond the incurred figures?
Despite what you might be told, having claims on your PII record will not always prejudice the firm. Claims happen – if they didn’t, law firms wouldn’t be obligated by the Solicitors Regulation Authroity to buy cover. However, it is important to provide underwriters with the full background to a claim beyond the total incurred: explain why this claim came about, but more importantly, explain the processes that have been introduced to mitigate reoccurrence. Showing underwriters that you have learnt from a claim will go a long way to displaying that your firm holds good risk management at the core of its practice.
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