Do you know how much your professional indemnity insurance costs?
Posted by John Thomas, chief executive of Legal Futures Associate LawNet
Thomas: better risk management is vital
Professional indemnity insurance (PII) has got to be one of the biggest costs for any firm, one of the top three purchases, yet many firms simply don’t know what they are spending on their insurance.
Yes, it’s probably in everyone’s mind at the moment – certainly the deadline is fast approaching for all firms to get their proposal forms into their brokers and the deadline for our group brokered scheme was a couple of weeks ago.
But despite this, when I’m out meeting new firms, all too often when I ask managing partners about the cost of their PII, they do not know. Not many can tell me to the nearest £10,000 and some have no idea at all, having devolved responsibility to the ‘insurance partner’. But is this acceptable in a world of change and challenge, and constant pressure on costs?
If you don’t know what it’s costing, then how will you focus on getting a better deal and managing costs down? Because you don’t have to just take it on the chin – you can manage down the cost through improved risk management and cutting down claims.
Claims levels are still running too high in the sector and that simply doesn’t give insurers confidence. Why are they running high? Well, that’s got to be because of insufficient risk management.
Better risk management is vital. Firms can start by getting the right quality marks, such as Lexcel or ISO 9001, but then they must make sure they stick to the procedures as set down. Quality marks on their own are not enough. Firms need to be continually assessing risk throughout their practice and embedding a culture of risk management. It’s a virtuous circle, where if you manage risk and get claims down, you will see insurance costs reduce, no two ways about it.
Pooling the PII placing as we do in LawNet can also cut costs – partly because it’s a way to further reduce broker costs and partly because it creates more appeal to the underwriter with a “pre-recommended” status for all the firms, as part of a scheme which includes obligatory risk management. They’re a recognised group based on quality to our ISO 9001 standard and group training in areas such as anti-money laundering and compliance. So risk management is at the heart of what we do and helps to drive down the insurance cost to firms.
So isn’t it time to open up that Pandora’s box and get to grips with what that professional indemnity insurance is costing your firm?
Tags: Lexcel, professional indemnity insurance, risk management
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