Navigating Renewals for Solicitors’ Professional Indemnity Insurance
The current market conditions for PI insurance
It’s that time of year again when solicitors begin to renew their professional indemnity (PI) insurance. However, this year’s market looks to be particularly challenging to navigate.
Since the start of the pandemic, PI insurers have been experiencing a significant increase in claims causing their attitudes to harden. But, what does this mean?
In practical terms, a tough PI market means less capacity for new entrants and higher prices, or no cover for existing law firms. So, those planning to start new law firms may find they won’t be able to get PI at all. It also means existing law firms will almost certainly face an increase of more than 25% in their premiums, even where no claims have been made by those firms. In the most difficult cases, the PI market will be unwilling to continue to insure a firm, based on its claims history or risk profile.
But a tough PI market also impacts future decision-making for those thinking of retiring in 2022 and beyond, as their run off cover will typically be 300% of what are now much higher base premiums. The result may be fewer exit options, a greater reliance on the M&A market for successor practices, and some who struggle on with no exit options.
In order for solicitors to obtain professional indemnity insurance in the current market, they will need to overcome a number of hurdles, including:
1. Preparing a proposal
It’s recommended that you prepare and submit your proposal at least 2 months before your current PI insurance comes to an end. Previously, a solicitor’s indemnity insurance proposal was a relatively straightforward form to complete. However, since the pandemic, the proposal form has been extended to include questions surrounding business resilience and risk management. As your proposal helps insurers decide whether or not to offer you a policy, it’s important you take the time to fill it out correctly.
2. Approaching brokers
If you’re renewing your solicitors’ professional indemnity insurance, it’s likely you will have a broker that you’ve previously used. However, it’s recommended you approach a number of brokers with your application, to determine which insurers they can access and increase your options to get the best insurance solution. Not all brokers access the whole market and not all have the same deals from insurers. This will require additional time and effort, however will likely be worth it in the end.
3. Finding an insurer
In the current market, insurers are cautious about which firms they are offering insurance to. This means it could be challenging to find an insurer who’s willing to take on your firm, especially if you have a poor claims history. However, without professional indemnity insurance, you will no longer be authorised to continue practicing and will be forced to enter run-off.
4. Choosing a policy
If you’re fortunate enough to be offered more than one PI insurance policy in the current market, you will have to choose which is the best solution for your firm. This not only means comparing the support being offered but the cost of the coverage. There has been an average insurance increase of 15% to 30% across the entire legal industry, so it’s worth reviewing your overall expenditure against your PI premium options.
5. Entering run-off
In the event your firm doesn’t manage to secure professional indemnity insurance, you will first enter an extended policy period, followed by a cessation period, both of which will provide you with extra time to find an insurer. However, in such a risk-averse market, the reality is that some firms will not be able to secure coverage and will be forced to enter run-off. This is a huge financial burden that no firm wants to face.
The simple alternative to professional indemnity
The path to securing solicitors’ professional indemnity insurance is one that’s full of obstacles to overcome. Not only is it time-consuming and stressful for solicitors to complete, but it’s also a significant expense, particularly for firms who have recently experienced a drop in their annual revenue due to business interruption in the past year. Luckily, there’s now a clearer route that solicitors can take.
The Bamboo Platform is a law firm operating system which handles all the back-office processes required to run a law firm, including solicitors’ PI insurance. This means, when a firm joins the Bamboo Platform, they no longer have to worry about approaching brokers, collecting data, completing a proposal, finding an insurer, or funding policy premiums. Instead, they can focus on providing legal advice to clients, whilst the team at Bamboo obtains the PI insurance policy for all Bamboo brands. But that’s not all. The Bamboo Platform can even help retiring lawyers avoid run-off cover. Whether you decide to find a successor or enter a merger, the team at Bamboo can help you retire in the way that suits you.
If you’re a solicitor who’s fast approaching the renewal period for professional indemnity insurance, get in touch with the Bamboo Platform. We can help you navigate the current market and achieve the best insurance coverage for your firm, saving you time, hassle and money.