RUNNING LATE FOR YOUR PII RENEWAL? GET A FREE QUOTE NOW
RUNNING LATE FOR YOUR PII RENEWAL? GET A FREE QUOTE NOW
RUNNING LATE FOR YOUR PII RENEWAL? GET A FREE QUOTE NOW
RUNNING LATE FOR YOUR PII RENEWAL? GET A FREE QUOTE NOW
…along with salaries and office space. Premiums for this essential class of insurance cover vary widely between insurance companies.
The professional indemnity market for solicitors can also be a minefield and in recent years hundreds of law firms have been closed down by the SRA because they were unable to obtain cover.
So it’s important to have some understanding of how the market works to be able to make an informed decision on which product is best for your firm. Please take some time to read this guide and call us if you require more information at 0800 180 4203.
We believe that in 2018 the market is in great shape to deliver some very competitive rates to the profession. This is primarily due to the scrapping of the assigned risks pool and the common renewal date, which has made the market more attractive to Insurers.
In revenue terms, a solicitor's professional indemnity is worth in the region of £ 250 million in annual premiums to the insurance market. This is for the ‘primary’ insurance cover and a further £ 50 million comes from excess layer or ‘top-up’ cover. This is generated by the 11,000 law firms practicing in England and Wales.
Until quite recently, all law firms renewed their PII on the same day each year, the 1st of October. However, this was a chaotic system and the common renewal date idea was finally abandoned in 2014. Now law firms are free to arrange and renew their cover at any time during the year. That said, around 90 % of law firms still renew their professional indemnity insurance on 1 October each year and it will probably take years for this date to unravel itself from the renewal process.
In England and Wales, you can only buy professional indemnity insurance for solicitors from an insurer who has signed up to the SRA’s Qualifying Insurers Agreement. There are approximately 20 “Qualifying Insurers” signed up to underwrite solicitors’ professional indemnity insurance but there is some churn each year with some insurers withdrawing and some new entrants.
Market distribution is heavily dominated by brokers who arrange PII on behalf of almost all law firms, with only a small number of firms arranging cover directly with insurers. Like any market, you’ll find the good, bad, and ugly so if you want some good advice about which insurers are best suited for your firm, please contact us anytime.
Over 90% of law firms buy their cover through insurance brokers, so brokers dominate market distribution. A good broker’s market knowledge lowers premium spend as well as provides valuable advice and support throughout the insurance period, especially on claims. For a quotation or free advice call us on 0800 180 4203.
Navigating solicitors' professional indemnity insurance involves understanding various factors. Typically ranging between 2% and 5% of fee income, rates depend on risk factors and market competition. However, rates may vary based on the nature of work, claims history, and more. New start firms enjoy discounted rates due to the absence of a historical track record.
Be mindful of minimum premiums, as insurers set different starting points. Minimum premiums, such as £1,000 or £5,000, vary among insurers. Ceasing operations requires SRA-mandated run-off insurance, usually calculated at three times the annual premium for six years of coverage.
Avoid treating professional indemnity insurance as a mere commodity; it's commercial insurance with potential coverage disputes. Given market volatility, leverage the expertise of a specialist broker for sound advice.
When seeking approval from the Solicitors Regulation Authority (SRA),new firms must submit a quote or 'offer of professional indemnity insurance' from an SRA-authorized provider. This quote must adhere to the Minimum Terms and Conditions (MTC) outlined in the SRA Indemnity Insurance Rules. To facilitate the quotation process, the following documents are essential:
New firms must be aware of the mandatory 'run-off' requirement for professional indemnity insurance if they decide to cease practice in the future. Ensure compliance and secure your firm's success with the right coverage.
To obtain a quotation you have to complete a fairly lengthy proposal form which will be reviewed by an experienced underwriter. Remember that the proposal form is a representation of the quality of your business to the insurance market, so it’s worth spending some time making sure it looks professional. An underwriter will be using it to judge you and they will also look at your website and perhaps your financial information.
If you spend time and money on risk management and improving quality, make sure your insurer knows about it. This could easily be overlooked and not reflected in your premium so add some notes on this subject.
The rating of a law firm or any professional indemnity risk is a complex process. Underwriters need to be highly skilled and require a significant amount of information to enable them to provide a quotation that accurately reflects the risk they are pricing. Premiums are calculated based on many factors which will include:
To assess the risk the underwriter will require a fully completed proposal form which they will consider in detail. They will also look at the firm's website or they may even look deeper online into a firm's background.
Presentation is more important than you might think. The underwriter is assessing the professionalism and quality of your firm and if the information is badly presented, it may influence their judgment and the premium they offer or they may even decline to quote.
All work carries some risk and for the legal profession, this can vary considerably. The following is by no means an exhaustive list but will give you some idea of the type of legal work where professional indemnity claims come from.
All qualifying insurers must provide a policy wording that is no less comprehensive than the minimum terms set by the SRA. The policy wording provided under the SRA ‘minimum terms’ is a ‘civil liability’ wording and is widely regarded as the Rolls Royce of professional indemnity insurance. The cover is broad and the small print generally favors the policyholder rather than the insurance company.
The policy will have the usual exclusions you’d expect to see in a professional indemnity policy. This could include;
The insurance company may be able to seek recovery of their payments if a firm is found to have engaged in non-disclosure of relevant factors, misrepresentation, dishonesty, or fraud.
Your insurance policy is a contract between you and your insurer. Like any contract, it is prudent to familiarise yourself with its wording. In particular, you should always read the policy exclusions.
Due to the complexity of the risk, online quotations are not yet available for law firms. Please call us for a quotation on 0800 180 4203.
The SRA specifies the minimum level of professional indemnity cover a firm must carry, depending on the structure of the firm.
Extra cover on top of the SRA’s minimum requirements can also be purchased if required. This is called an ‘excess layer’ or ‘top-up’ and the total amount of cover will depend on the size of the firm and its risk exposure.
If you are a solicitor in practice you are required to have professional indemnity insurance by the regulatory body of the country in which you practice.
In England and Wales, the representative and regulatory functions are separated. The Law Society represents the profession, while the Solicitors Regulation Authority (SRA) is the regulatory body
Solicitors are required to have professional indemnity insurance cover for the entire time they are practicing and need to show their regulator that they have professional indemnity insurance in place as part of the practicing certificate renewal process.
Trading without adequate professional indemnity insurance is a terminal breach of regulatory requirements and a firm will be prevented from trading and closed down if they cannot obtain cover. The availability of professional indemnity insurance for every law firm should not be taken for granted as there are numerous examples of the SRA closing down firms that were unable to obtain coverage.
This system means that the PII market is deciding who can or can’t practice, so we cannot over-emphasize enough the importance of internal risk management to maintain a good risk profile. Evidence of a firm's cover is required every year by the SRA.
For free advice or a professional indemnity insurance quotation, please contact us on 0800 180 4203 or email info@legalexplus.com
Legal Ex Plus
This guidance note is intended for information purposes only. Whilst all care has been taken to ensure the accuracy of the guidance note it is not to be regarded as a substitute for specific advice. This guidance note shall not be reproduced in any form without our prior permission. © 2019 Lex Insure Services Ltd