Professional Indemnity Insurance Renewal Challenges
Professional Indemnity Insurance (PII) renewals have become increasingly arduous for solicitors. Many firms are facing substantial premium increases, and some insurers are even refusing to provide coverage to solicitors, potentially leading to the unfortunate closure of a few law firms.
As the traditional October renewal date approaches, law firms should consider starting the renewal process now. Over the past few years, there has been a significant hardening of the PII market.
Reasons behind professional indemnity insurance renewal challenges:
- Economic uncertainty: Insurers adopt a cautious approach in providing cover for solicitors in uncertain economic times. The current cost of living crisis and potential upcoming recession have added to the hardening of the professional indemnity insurance market, leading to law firms facing prohibitively expensive premiums.
- Claims against law firms: Whilst the number of claims against solicitors hasn’t risen sharply, the monetary value of these claims has surged. This risk has led to insurers becoming more hesitant to offer their products.
- SRA minimum terms and conditions (MTC): Insurance for legal professionals, owing to the Solicitors Regulation Authority (SRA) minimum terms and conditions, is considered less profitable and more challenging to underwrite compared to other types of insurance. The comprehensive terms, conditions, and exclusions might deter new insurers from covering the legal profession.
- Cyber-attacks: As cyber-attacks become more common in all industries, law firms, holding sensitive client data, are at risk of facing claims related to data breaches.
Outlook for solicitors PII renewals:
The reluctance of a significant number of PII insurers to cover legal professionals is likely to persist. Practice areas deemed higher risk will face more difficulties, leading to steady increases in insurance premiums, and some firms may struggle to obtain coverage at all.
Steps for solicitors to ensure PII coverage
To enhance their chances of obtaining PII coverage, solicitors should prepare a well-structured presentation that offers insights into their practice and addresses specific risk mitigation plans. Following the Law Society’s advice, solicitors must be organised and submit their applications well in advance. Waiting until the last few weeks before renewal or missing the deadline altogether can jeopardise the chances of obtaining coverage.
What happens in firm do not obtain professional indemnity insurance?
Renewing your professional indemnity insurance is essential for effective risk management within your firm, providing coverage for potential claims made against your business. Failing to secure professional indemnity insurance would result in your law firm operating under the Solicitors Regulation Authority’s extended policy period and cessation period.
During the extended policy period, your firm will receive an additional 30 days of coverage, allowing you more time to obtain the necessary insurance. However, if insurance remains unattainable beyond this period, your firm will enter the cessation period. This phase grants your firm 60 days to plan for an orderly closure, explore possibilities for merging with another firm, or being acquired by another entity.
Closure of a law firm may be necessary if a firm is unable to secure professional indemnity insurance.
How can Annecto Legal assist?
When you become a client of Annecto Legal, you will have the benefit of access to our associates, Paragon, who specialise in solicitors’ professional indemnity insurance.
If you become clients of Paragon you will receive complimentary membership of The Strategic Partner. This includes a wide range of risk and business solutions that can be seamlessly integrated into your firm. Furthermore, we offer access to the Compli team at Weightmans, a service designed to provide additional resources and expertise as required.
Clients can transfer the costs and risks of their case using commercial litigation funding and insurance and put themselves in a position of strength to negotiate the best settlement possible or go to trial if necessary.
We deal with a variety of legal cases including assistance with breach of contract solicitors, professional negligence solicitors, fraud, banking litigation and can even help if you’re suing a solicitor or looking for commercial dispute resolution.
Contact us today via email at firstname.lastname@example.org.
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* Annecto Legal can only assist on case where the loss is in excess of £100,000, with the exception of data breach claims. If you need assistance on a claim worth over £100,000, please get in touch using our form or the details below:
Annecto Legal Ltd, 106 Kennedy Building, Murray Street, Manchester , M4 6HS
0800 612 6587