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For many firms, solicitors' professional indemnity insurance (PII) is something they set up and forget about. Although they understand the importance of coverage, they are not thrilled about the task of comparing prices between providers. In light of the current market for professional indemnity insurance, this is particularly true.
Many law firms are stressed when it comes to applying for or renewing their professional indemnity insurance due to increasing rates, a lack of new insurance providers, and a perception that existing providers are less inclined to accept new business.
There are, however, some good news and practical steps firms can take to reduce the stress and potential costs associated with personally identifiable information. Firms should still remain optimistic and there are steps they can take to reduce their PII costs and the stress associated with application renewal.
Indemnity insurance market conditions
During the past few years, we have witnessed some of the most challenging market conditions, with premium rates consistently increasing. As a result of the lack of new insurers entering the market and insurers' reduced appetite to take on new clients, some firms at their renewal have had a limited choice of insurers.
It is notable, however, that we are now starting to see some signs of recovery in the market, with insurer increasingly open to accepting new clients, and rate increases beginning to moderate.
Expensive, even at the best of times
It is well known that solicitors' PII policies can be costly (especially when compared with policies for other professions). There are several reasons why this is the case. Unlike other policies, it's the only one in which insurers must provide run-off coverage, even if the policy is unpaid. Although these costs aren't new, it's worth mentioning that professional indemnity insurance for solicitors can be expensive even at the best of times.
There is an increase in claims
Due to an increase in asset and transaction values, PII claims have become more frequent as well as more severe. Although approximately two-thirds of firms don't experience claims, those from the remaining third now exceed the total premiums insurers collect from the entire profession. Unfortunately, this means that firms that have done little wrong have to stump up additional costs to prop up the market.
There's still hope for the future
Fortunately, it isn't all bad news. The market for solicitors’ professional indemnity insurance is cyclical, meaning the market is sure to soften again, although the exact timing of this is unclear. It is evident however that within the last 12 months insurers are slowly beginning to become more willing to take on new clients which is a promising sign. Furthermore, increases in fees have also now begun to plateau. For firms able to weather the storm, there are set to be more favourable conditions ahead.