News
State of the Solicitors PII Market (2023)
12 July 2023
It is fair to say that over the past few years, almost all law firms have encountered significant increases in their Professional Indemnity Insurance (PII) premiums.
We fully appreciate that the cost of PII sits certainly in most law firms’ Top 5, if not Top 3, business expenses and any increase in the premium flows straight through to your bottom line. Therefore, controlling this cost is key.
However, for the first time in a number of years, we have some better news in relation to PII. Whilst there remains a little uncertainty from the volatile wider economic conditions, it does seem that the tougher measures imposed by insurers over the past few years, whilst unpalatable when paying the bill, have had the desired effect in stabilising the market.
The recent 1st April mini renewal season, where approximately 30% of law firms have their PII due for renewal, saw the majority of insurers prepared to offer a flat rate, with any premium increases being purely in line with any increase in fee income.
Where insurers have applied rate increases, these have been low single-digit increases and have been applied to firms that predominantly practice in higher-risk areas such as conveyancing.
As you would expect, the exception to the above are firms that have a poor claims record where insurers are still likely to seek above-average rate increases.
As we approach the 1st October renewal season, we are expecting more of the same of what we saw in April. We are also seeing an increase in insurers’ appetites for new business which will serve to create more competition which in turn naturally regulates premiums.
There is also likely to be at least one new Participating Insurer in the Solicitors PII market by October. It is anticipated that at very least one of these insurers will be in a position to underwrite business for 1st October renewals but as yet it remains to be seen what their appetite will be in relation to law firms. Like any sensible new entrant to the market, we expect their initial approach to be ‘easy does it’ to ensure their sustainability in the market. So, whilst new capacity is always very welcome, it is likely to be 2024 before the full effect of this will start to be felt.
If your firm has its PII renewal due on 1st October, how should you approach this, given the market changes? Firstly, we must make clear that the softening in market conditions is very much in its infancy and so the chances of cutting great swathes of premium off last year’s bill is unlikely.
However, the chances of striking a better deal for your firm are much improved this year than in recent years, be that with your existing insurer or an alternative. During the recent hard market conditions most law firms, quite rightly, stayed with their existing insurer and whilst we are great advocates of continuity of insurers, we also believe that it is prudent to periodically test the market. Therefore, this year is likely to be a good time to make that market check.
It is when the market starts to improve that the potential for leaving money on the table is greater. Therefore, ensure that any market exercise undertaken by your broker is transparent so you know which insurers have been approached and what their response is, so you know that when you sign up for another renewal, you are signing up for the very best deal that is available. Ask your broker whether they are tied to an exclusive deal with your insurer or whether they are giving you a truly independent, balanced view of the market.
We are also seeing that some insurers are prepared to consider 18-month deals on a selective basis. Therefore, if you are interested in having an extended period, ask your broker if this is available and what the terms of that extended deal would be.
As always, the quality of risk information is key so when submitting your proposal ensure that you include as much positive information about your firm’s processes and attitude to risk as possible, which will not only reinforce this message with your existing insurers but also appeal to any potential insurers.
If your PII renewal is indeed upcoming or if you would like advice or guidance on your PII placement, then please do not hesitate to contact us at JMG Professional Risks. Our team has been looking after the PII arrangements for law firms for decades and we ensure that our clients receive competitive premiums based on a balanced, independent view of the market. We are more than happy to advise on any issue that you may have. Our contact details are as follows;
Blake Hynds: 07706 358603 | Blake.hynds@jmginsurance.co.uk
Jason Butcher: 07842 314297 | Jason.butcher@jmginsurance.co.uk
