The 2023 Solicitors’ Professional Indemnity Insurance Market

Current State of the Professional Indemnity Insurance Market

The Solicitors’ Professional Indemnity Insurance (PII) market is a critical component of the legal industry. As with any insurance market, it experiences fluctuations and changes in response to various factors and for the last few years, we have been in what is commonly known as a ‘hard market’, meaning premiums were rising, insurers had reduced capacity, and there was greater underwriting scrutiny from insurers when selecting clients.

The renewal on 1^st October 2023 brought about the beginning of positive change for legal businesses, as summarised below.

Enhanced Competition

One of the most noteworthy developments in the solicitors’ PII primary layer market this year has seen the introduction of new SRA Participating Insurers. While these new insurers are taking a measured approach to entering the market and have their own underwriting criteria, it is certainly a positive sign that some firms now have more insurer choice.

There have also been signs of increased competition among existing providers. Some long-established solicitors PII insurers are now vying for certain types of solicitors’ business, leading to competitive pricing and reductions in rate.  This enables some solicitors firms to obtain more attractive PII premiums, thereby reducing operational costs.

One of the best ways to measure the competitiveness of your premium is as a percentage of your firm’s last completed financial year’s fee income. This percentage, or ‘rate on fees’, varies from firm to firm depending on factors such as areas of practice and claims history.

During this renewal, JMG clients saw an average reduction in the rate on fees of 0.4%, which in monetary terms was almost £12,000 on average. *Taken from our own client data sources.

Excess Layers

This renewal saw the introduction of several new excess layer providers and lots of capacity in this portion of the market. Most new insurers in this space focused on firms with less than £5m annual fee income, providing the opportunity for many firms to make savings on the total cost of their excess layer program and keeping established excess layer insurers competitive.

With claims costs for law firms increasing, cover up to £10m is widely regarded as the ‘working layer’, meaning it is unlikely that excess layer premiums will drop as low as they were around 2017/18.

Extended policies

After several years of most insurers refusing to offer them, longer-term policies seem to be making a comeback. Most insurers now seem prepared to consider 18-month deals for well-run practices. 18-month premiums are generally offered on a pro-rata basis, with one insurer even giving a slight discount on the additional 6 months’ cover.

The firms that have taken up this offer have done so to take advantage of the benefit of having budgeting certainty for a prolonged period as well as delay the considerable administrative time that goes with preparing for renewal.

Conclusion

The solicitor’s PII market has certainly improved towards the end of 2023. While we are by no means in a soft market just yet, the level of increased competition between insurers, new entrants, additional capacity and expanded cover options all point towards a picture that will become even more competitive in 2024.

Law firm leaders must stay informed about these positive developments and understand the market to achieve the best possible result at renewal. By engaging with a specialist broker such as JMG  and embracing the available risk management services, firms can continue to protect their practices and focus on providing their clients with the best legal services possible.

Renewing and getting a new professional indemnity insurance quote

The value of knowing where your PII premiums sit against your peers cannot be underestimated. JMG’s specialist Solicitors’ PII team can provide accurate benchmarking for firms of all sizes. By simply reviewing your last renewal submission and current policy information we will:

• Give you our view on the approx. premium you should have paid at the last renewal and let you know if the premium you did pay is consistent with the market.
• Advise which insurers will have an appetite to give you a professional indemnity insurance quote for you next time.
• Estimate the rate/premium you can expect at your next renewal.
• Identify claims trends, positive risk management features and commercial factors which affect your premium and advise on a strategy to improve any of these where necessary.
• Ensure your policy arrangement, including any excess layers and other covers such as Cyber, Directors’ & Officers’ or Office Insurance, is optimal and fit for purpose.
• Work alongside your other advisors and management team to ensure you truly understand the value of your PII premium and the impact any planned changes to your business may have upon it.

This exercise will give you a view of where your PII arrangements sit against other firms of a similar profile. When providing this service, we do not share your information with insurers and promise to always be transparent; even if the outcome is that your current arrangement is the best, we will tell you.

It is often better to conduct a benchmarking exercise away from renewal so that you have time to digest the feedback and prepare a plan for your next negotiation.

If you would like a confidential discussion regarding your next PII renewal, or would like a professional indemnity insurance quote, please do not hesitate to get in touch.

Blake Hynds: 07706 358603 | blake.hynds@jmginsurance.co.uk

Jason Butcher: 07842 314297 | jason.butcher@jmginsurance.co.uk

Gareth Milner: 07923 247237 | gareth.milner@jmginsurance.co.uk