[5 Minute Read]

In this updated article, John Jones, Managing Director of Champion Professional Risks, talks about the impending 2021 Solicitors Professional Indemnity Insurance renewal season. This includes the considerations to be made and the pitfalls to avoid for Solicitor Practices when looking at their own Professional Indemnity Insurance placement.

Traditionally all Solicitor Practices renewed their Professional Indemnity Insurance on the same day each year (1st October) but this was abandoned by the Solicitors Regulation Authority (the authority who govern these rules) in 2014. After the rules changed, insurers were able to offer 18 month policies to move firms away from the congested renewal date of 1st October. Whilst many Solicitor Practices moved away from this date, the majority still renew their policies on 1st October.

Since last October (2020 Solicitors renewal season) market conditions have not improved following the departure of a number of insurers and MGAs (AON/Maven, China Re and Omnyy) in recent years. Unfortunately there remains a dearth of insurer capacity and the insurers left participating in Solicitors Professional Indemnity Insurance are expected to be extra selective this year. We also expect to see further rate increases applied to Excess Layer (top up) policies as claims costs continue to break through primary limits of indemnity and so underwriters now increasingly view these policies as “working layers” and price for them accordingly.

18 months on from the start of the first lockdown, the impact of COVID-19 on professional negligence claims against Solicitors is starting to manifest itself as insurers report a spike in claims activity directly or indirectly related to the pandemic. This renewal season, insurers will still want to drill down into the following COVID-19 related areas when reviewing your risk exposure:

• How your practice coped during prolonged “working from home” periods
• Details of staff redundancies, furloughed staff and reduced hours
• Your financial stability, for example pre COVID fee income and profit forecasts vs post COVID, balance sheet and borrowings
• Any changes to the types of work carried out during the pandemic and your competencies in these areas of work

Insurers are also asking for more risk information relating Cyber risks in the form of lengthy Cyber Questionnaires. This is a consequence of increased frequency and severity of claims relating to data breaches and cyber-attacks which result in claims against Solicitor Practices.

Sadly Solicitors Professional Indemnity insurance remains very much a “seller’s market” and so it is crucial that you present your firm in the very best way possible to secure favourable terms for renewal 2021. We’ve compiled a few pointers to help you along the way:

Presentability

It is imperative that your Proposal Form is completed thoroughly, neatly and with care. In view of the complexities of these forms, we would recommend that a senior person completes this task in collaboration with all other stakeholders in the firm. This person needs to understand the business and the risk associated with the firm’s activities. Do not delegate this crucial role to a junior member of staff, a mistake which is commonly made.

First impressions really do count here and can actually be the difference between obtaining a quotation from an insurer, or not. If the form is untidy or obviously completed without too much care, what message do you think this gives to the underwriter, who is expected to insure the quality of your work or advice?

We would always recommend that a Proposal Form is in typed form so that it is easy to read and looks more professional than a handwritten submission.

Insurance broker selection

Ensure that your broker has the relevant qualifications and/or experience in dealing with Professional Indemnity insurance. Professional Indemnity insurance can be complex and you need to ensure that your broker understands the cover, and the market. It can be beneficial to use a specialist Professional Indemnity broker.

Another benefit of using a specialist broker is that insurers may be more comfortable with presentations received from a specialist and might be willing to put forward a more competitive quotation.

Avoid ‘Flooding the market’

Asking lots of brokers for quotes might seem like a good way to “cover the market” and get the best terms possible. But remember that brokers are middle men and will often use the same insurers. So, if you do this, an underwriter may receive your submission more than once from different brokers. This is known as ‘flooding the market’.

Flooding the market will turn many underwriters off as they will realise that the chances of them actually winning your business is diminished significantly if there are lots of insurers and brokers involved. Instead they’ll focus their limited resources on cases that they might actually win and are likely to “No Quote” your submission.

Our advice is to select a broker who you can trust and who meets your criteria and work with them to secure the best terms from the market. If you want to engage with more than one broker, limit the number involved, and try to manage which insurers are being approached.

Only target suitable insurers

A scattergun approach rarely yields the best results in any aspect of business.

Insurers keep a log of historic quote requests and will get tired of seeing the same cases each year. So if they see that they have quoted for your business before and haven’t won your business they will be less inclined to put forward a serious quotation or may simply provide a ‘no quote’. This can work against you where an insurer’s appetite changes, over say a three year period, and they’re actually now an ideal fit for your business, but they’ve now grown tired of seeing your quote requests. We recommend that you work with your broker to only target those insurers who are likely to have a strong appetite for your business at that point in time.

If you would like to discuss Solicitors Professional Indemnity insurance with our experts, please contact us.

John Jones
Managing Director
Champion Professional Risks Limited
T: 0330 128 9828
M: 07769 823 483
E: john.jones@championpi.co.uk