A Hard Solicitors’ PI market

Published 6 May 2021

As well as dealing with business resilience issues arising out of COVID 19, solicitors are also facing some of the hardest Professional Indemnity market conditions since demutualisation in 2000. The Law Society has reported premium increases of between 5-50% as typical. There are also reports of Insurers requesting personal guarantees from partners and policy excesses to be placed in escrow accounts.

This is seen by some as an inevitable and cyclical correction of the unsustainable and artificially low premiums in previous years. However, it is also viewed as a consequence of the reduced appetite by Insurers for solicitors’ PI business following a re-examination of PI business performance, to include the Lloyd’s of London Thematic review in July 2018, which is said to have first impacted on solicitors’ renewal in April 2019.

Whilst solicitors can expect potential premium increases as a result of ongoing claims and claims history, the most significant factor on renewal is likely to be market conditions with Insurers additionally being more selective as to the type of solicitors firm they are choosing to insure. Insurers are mindful of the very wide and what is often described as “gold plated” protection which such PI insurance provides to firms, the focus of the Minimum Terms and Conditions which attaches to the first £2-3m policy layer, being the protection of the consumer.

The best way to tackle such a market is to start the renewal process early and to provide as much detailed information to Insurers as possible on the risk management procedures of the firm and the business resilience measures undertaken. As a result of perceived increased risks from home working, to include cyber and data management, a lack of face to face supervision and increased work pressure to meet client deadlines resulting from stamp duty and land tax holiday guillotine periods, this will be an area of particular focus for Insurers. Proactive measures taken by firms to address these increased risks will not only put firms ahead for the upcoming renewal but centrally, they will also prevent claims arising, avoiding wasted management and fee earner time dealing with claims and facilitating an easier follow on renewal. Time, therefore, very well spent.

DACB recently provided a webinar which dealt with the issue of increased risk to firms due to COVID 19. Please contact us if you missed it and wish to see a recording.