By Legal Futures Associate Clio
For many firms, solicitors’ professional indemnity insurance (PII) is a ‘set it and forget it’-type of activity. They understand they need coverage, but they’re far from thrilled about the process of scouring providers to find the best deal.
That’s especially true when you consider the current professional indemnity insurance market.
Surging premiums, an absence of new insurance providers, and a perception that existing providers’ have a decreased appetite to take on new clients has led many law firms to become stressed at the idea of applying for or renewing their professional indemnity insurance.
However, according to Frances Lodge, Assistant Vice-President of Lockton Solicitors UK, who recently spoke to leading legaltech platform Clio about the topic, there is some good news and practical steps firms can take that will reduce stress and potentially the costs of PII.
This article draws from Frances’s interview, outlining the current state of the market before highlighting why firms should still remain optimistic—and the steps they can take to reduce their PII costs and application/renewal stress.
Market conditions for professional indemnity insurance
“In recent times we have seen some of the toughest market conditions, with premium rates increasing consistently. With an absence of new insurers entering the market, and a reduced appetite for insurers to take on new clients, choice for some firms at their renewal has been limited,” Frances told Clio.
“However, we are now starting to see some green shoots in the market, with insurers more willing to take on new clients, and rate increases beginning to plateau.”
That said, these are far from the only factors to have rocked the market.
A costly policy, even at the best of times
Most lawyers will be aware that solicitors’ PII policies can be costly (especially compared to other professions). This is the case for a number of reasons. Consider that it’s the only policy where insurers must provide run-off cover, even when it hasn’t been paid for. While these costs are nothing new, it’s worth highlighting that seeking solicitors’ professional indemnity insurance coverage can be an expensive endeavour at the best of times.
Claims are surging
PII claims are increasing in both their frequency and severity, given that asset and transaction values continue to rise. Clio reports that while roughly two-thirds of firms aren’t experiencing claims, those from the remaining third now exceed the total premium that insurers collect from the entire profession. Unfortunately, this means that firms that have done little wrong have to stump up additional costs to prop up the market.
Why there’s still room for optimism
Fortunately, it’s not all doom and gloom. As Frances explains, the market for solicitors’ professional indemnity insurance is cyclical, meaning the market will again soften—though nobody quite knows when. Frances points out that insurers are slowly becoming more willing to take on new clients compared to 12 months ago, so that’s certainly a positive sign. What’s more, fee increases have also started to plateau.