Small law firms are increasingly being targeted by cyber-criminals, but very few attacks are actually succeeding, new research has found.
The review of the 2017-18 professional indemnity insurance period – published after most firms have already secured their 2018-19 cover – also showed that the cost of insurance as a percentage of turnover is on the rise.
It recorded as well that claims were made against 10% of firms, down from 13% last year.
The Law Society surveyed 605 firms with up to 25 partners. It found that, in all, 32% had been targeted by scammers in the past year, up from 26% in last year’s research.
However, while the number of firms of more than 11 partners targeted actually fell from 64% to 58%, 24% of sole practitioners and 36% of firms with two to four partners reported attacks – sharp rises from 18% and 28% respectively.
Spam emails/phishing accounted for the vast majority of attacks (87%), followed by telephone calls/vishing (15%).
Some 94% of scams were without consequence, with only 6% resulting in a data breach, 3% in financial losses, and just 1% of losses being characterised as serious.
Where money was lost, virtually all of it was replaced by firms’ banks or insurers, although only 21% of firms polled have cyber insurance.
However, Law Society president Christina Blacklaws warned: “We must not become complacent because the effects of just one successful attack can be devastating for clients, law firms and staff.”
The broader picture of the 2017 renewal was that although actual premiums fell for firms of up to four partners, their cost as a percentage of turnover across all categories of firms went up.
Three-quarters of firms with 11-25 partners notified their insurer of a possible claim in the last year, compared to 24% across all categories surveyed.
The survey showed that 34% of firms took out a policy for longer than a year, with two-year deals emerging for the larger firms.
The majority of firms (76%) chose to renew with their previous insurer and indeed 79% only approached one insurer for a quote.
Travelers again had the biggest share of this market (15%) followed closely by AmTrust (14%). QBE was third with 8%. Aon, Lockton and JLT were the most popular brokers, with the research confirming the continuing trend of firms contacting just one broker, from 47% in 2013-14 to 74% in 2017-18.
Most firms found the renewal process straightforward, while satisfaction with brokers was extremely high.
The Law Society said it was worrying that 53% of firms were unaware of the closure in 2020 of the Solicitors Indemnity Fund (SIF), which has provided solicitors with post-six year run-off cover since the move to a market-based system of insurance in 2000.
Ms Blacklaws said: “Just one-third of small firms are aware they are approaching a cliff edge in relation to long-term run-off cover, and they are the part of the profession most likely to suffer if they have not arranged a suitable substitute.
“We have been warning about the potentially serious implications of the loss of SIF for many years. Firms that are going to close without a successor practice need to think about the kinds of liabilities they might still have outstanding when their mandatory six-year run-off cover ends.
“They may need to factor in the additional costs of extending run-off cover to avoid being sued in a personal capacity.”
Noting growing evidence that the cost of insurance premiums may soon increase, Ms Blacklaws added: “The findings reinforce an increasingly widely held view that the market is hardening, and prices could well rise next year.”