Professional Indemnity Insurance Impacts Entire Legal Sector
What’s happening to the professional indemnity insurance market?
The professional indemnity market has never been more challenging to navigate. As the number of insurers willing to offer coverage to law firms has reduced recently, the cost of insurance has increased. Not only do firms need to find an insurer, they need to find an insurer that offers an affordable policy to keep their law firm trading.
So, whether you are looking to start your own practice, renew your PI cover or exit your firm, you could be badly impacted by the costs of PI insurance in a hard insurance market.
How the insurance market impacts…
Lawyers starting their brand
What should be an exciting time for lawyers who are starting their own brands can become extremely stressful. Before a law firm can begin offering legal services to clients, they must secure professional indemnity insurance. However, insurers tend to view newer and smaller firms as particularly high risk. Whether rightly or wrongly, this could make it even more difficult for lawyers to achieve the mandatory insurance and start their own law firm.
Lawyers growing their practice
Not only do law firms need to get insurance to offer legal services in the first place, they also need to renew this cover annually. To secure professional indemnity insurance, law firms need to prepare a risk profile, which demonstrates the quality of their performance. Whilst a firm with no claims may be confident in their ability to secure insurance, the current market conditions mean that many well-performing firms are not being offered the insurance policies they would usually receive. With the capacity decreasing and the cost increasing, firms are either being offered policies with 30-100% premium increases or not being offered policies at all.
Lawyers exiting their firm
If a law firm fails to renew their professional indemnity insurance, they could be forced to close, find a successor or pay for run-off cover. However, the cost of run-off cover will be calculated as up to 300% of their last insurance premiums. Unfortunately, this means that law firms who fail to secure insurance in the upcoming renewals period will be faced with a hefty run-off cover bill.
Lawyers who are looking to sell or retire to exit their law practice will experience similar issues, with the cost of their insurance impacting the value of their firm. Alongside the risks that come with acquiring a practice, retiring lawyers may find it difficult to sell their firm, without losing out on valuation.
Can lawyers avoid the impacts?
The professional indemnity insurance market is impacting the entire legal sector, stopping new firms from opening and forcing established firms to close. Fortunately, there is a way for lawyers to have the PI cover they need and avoid these negative effects.
The Bamboo Platform is a law firm operating system, which offers a very attractive alternative in these stormy seas, whether for new start or established firms finding cover unobtainable or because it’s time to retire. When you join the Bamboo Platform, you will receive expert support to navigate onto our platform and move the risks, costs and time associated with PI insurance to us. By organising your finances and preparing your practice, we will ensure your law brand is covered by our PI insurance policy. We will even provide the regulation and compliance required to start and run a law brand, leaving you free to focus on your clients and services. Once you are ready to retire from your firm, we will help you prepare and implement an exit plan, whilst retaining the value of your firm.
So, whether you are looking to start, grow or exit a law firm, the Bamboo Platform can provide you with the support you need. Get in touch to find out more.