October 2021 Professional Indemnity Insurance Renewal – Key Points

Many law firms once again have their eye on their Professional Indemnity renewal on 1st October.

The market has moved on in the last 12 months, as insurers and brokers learned to cope with Covid and considered the potential risk impact of the pandemic against the backdrop of a PII market that was already getting tougher, with less insurer capacity and increasing premiums.

So, what is your insurer likely to focus on when they receive your proposal form?:

1) Financial position – Most insurers are asking for sight of your last 2 years’ accounts as a minimum. If these display anything unusual or potentially worrying, be prepared to provide additional context. You should be able to demonstrate a clear financial plan and control over all aspects of your firm and client monies, including adherence to the recently updated AML guidance from the SRA.

2) Managing Covid – Your proposal information needs to lay out the impact Covid initially had on the business and where you find yourself now (including details of any financial support taken, staff furloughed, any planned redundancies etc). You should also include details of remote working practices, how staff are trained / supervised now and if there has been any pivot to other work areas or plans.

For many conveyancing firms, new matters have dramatically increased over the last 12 months, so you should proactively show how you are managing the increased risks the additional workload presents – especially if this is being undertaken with less resource than previously.

3) Cyber security – With three formal lockdowns in England, most business’ abilities to work from home have been thoroughly stress-tested. As law firms are one of the largest targets of organised Cybercrime, anything you can do to show insurers you have thought about and implemented additional cyber security measures where necessary will only be viewed in a positive light.

You should think about both the physical aspects (updated hardware, increased IT security protocols etc) as well as the human element – increased staff training, for example. If you utilise specific third parties to assist with this, be clear about who and why.

4) The market and your insurer / broker strategy – With an uncertain economic future, at least in the short term, “better the devil you know” can be a very natural reaction. Regardless of whether you plan to just speak with your existing broker / insurer, or widen the net, it is imperative that you are aware of:

– Which insurers your broker(s) will approach, and why
– How your proposal form and risk profile is likely to be viewed by the market before you being the process of obtaining quotes
– What value your broker can add beyond simply obtaining quotes and transacting the policy. You should also be aware of how your broker is remunerated and how they access insurers – do they speak to individual underwriters directly, or is there another process?

Hard PII renewal markets are typically shorter than soft or benign ones, and as the Covid situation comes to a close we would hope to see some stabilisation of premiums and more certainty in the next 6 – 12 months. Meanwhile, firms should do all they can and not be afraid to challenge the status quo, to get both the best value renewal premium and correct ongoing service for an expenditure that always features very highly on their P&L.