Law firms are facing a 30% increase in their professional indemnity insurance this year, and even more for those with bad claims histories, the Law Society has warned.
Urging firms set to renew in October to act now, the society said it expected all firms to see increases in their premiums, particularly if coming out of an 18- or 24-month policy.
It pointed to research undertaken by broker Lockton on April renewals that found firms’ premiums increased by an average of 15% for the primary layer of cover, but firms with turnovers of £50m-100m saw increases of around 40%.
Law Society president Simon Davis said: “Firms should brace themselves for an average increase of 30%, but those with bad claims histories should expect far higher increases.”
He predicted that the combination of Covid-19, the uncertainty of the Brexit negotiations and the fact the market was hardening already in 2019 meant that this autumn could be “the most challenging period for solicitors since the insurance market opened up in 2000”.
He advised firms to talk to their brokers now: “Insurers are reluctant to take on new risks just now and many are not seeking new clients. This cautious approach means firms will be expected to provide more information up-front, such as details about risk management, firm finances, continuity planning and evidence of ongoing profitability.
“There will also be additional questions about how the lockdown and Covid-19 have affected business, including redundancy plans, furlough scheme use, home worker supervision and the steps that have been taken to minimise risk.”
Mr Davis said solicitors should also consider whether they need financing to pay for the increased premiums, suggesting the government’s Coronavirus Business Interruption Loans scheme as one possible source – this allows businesses with an annual turnover of up to £45m to borrow up to £5m, repayable over six years, with the government paying the first year’s interest.