You may recall my advice last year for a pain-resistant renewal. I hope that it helped you towards your least-troublesome Professional Indemnity Insurance (PII) renewal of recent times.
But time has a habit of passing, and when looking towards your next renewal there is insight to be gained from the last 12 months, and in particular from the profession’s inaugural April renewal season. In this article I consider the market and suggest how best to approach the October 2015 renewal season.
There seemed to be concern amongst commentators that underwriters might be in some kind of hibernation during the first quarter of 2015, waiting to emerge bleary-eyed and blinking in the summer sun to start looking at claims statistics prior to the October renewals. We found these fears to be groundless and activity levels with our partner insurers were all we could have wished them to be. It was also welcome that 2015 hasn’t been burdened with the uncertainty of goalpost-moving Solicitors Regulation Authority (SRA) consultations. These delayed the start of the 2014 renewal season as underwriters had the unenviable job of pricing risks without knowing what cover they would be giving.
Overall, the April renewals seemed to be “steady away”. We saw no great fluctuation, with corrections in rating being limited to 5-10% all other things being equal. However, these renewals are still in the minority – the larger part of the profession still renews in October and it’s important to keep that in mind.
There was new capacity in the market last year, which helped particularly in the smaller firm sector, and the use of unrated insurers appears to have diminished further, with their share of annual premium reducing from 12% to 8%. Overall the pot of money collected by insurers stayed around a quarter of a billion pounds – roughly where it was fifteen years ago, when the open market replaced the Solicitors Indemnity Fund.
As stated last year, your renewal mission is to be as insurable as possible. Everything you submit as part of your renewal pack should portray your desirability as a valued partner to your current insurer and as a potential client to be coveted by other insurers. If there are unhappy episodes in your recent past, strive to make them virtues by showing how you were financially prudent enough to survive an errant employee or principal, how your vigilance helped to identify weaknesses in your risk management, how you invested time, effort and a little money in tightening up procedures after an avoidable claim. One of the last things an underwriter wants is a client who, when they make a mistake, puts a rubber band around the file, gives it to their insurer and forgets about it.
The advice that follows should be helpful in achieving this:
- Just as you have an ongoing duty to notify claims and circumstances, you should also keep your broker/insurer apprised of changes in the firm throughout the year. Regular meetings with your broker (and occasionally with your insurer) should help to avoid any surprises on your proposal form.
- Think about the shape of this year’s renewal. Were you happy with the 2014 outcome? If not, what could you, your broker or your insurer have done better? Do you know the lie of the land in the market this year?
- The chances are it won’t get cheaper if you leave it until September. There may be some insurers who start to worry that they haven’t filled their capacity with a couple of weeks to go, but history shows that mainstream insurers are more likely to close their books early than they are to throw the doors wider open. Leave “last minute dot com” for the family holiday.
- Think about your premium funding. No other class of insurance requires an insurer to take on the credit risk that accompanies distressed run off cover, and insurers will want to have the premium or at the very least know where it’s coming from before irrevocably binding cover. You don’t need to finalise a deal to the nearest penny to be able to start enquiries about funding.
- Think about the files you see from other law firms. Are they legible, in order, secure, complete? It would only be human to be scornful of files that fail to meet your own high standards. And then apply this to your renewal submission. Are there gaps which could lead to queries in an underwriter’s mind and lead to a premium that errs on the side of caution? Identify any negative points and address them head on. All underwriters will notice them, even at the height of the season – that’s their job.
- Please ensure that your work split adds up to 100%!
Also, if you declare “Other work”, underwriters will assume that it’s high risk rather than low risk, so find a home for it in other categories if you reasonably can, or explain it fully in a covering letter.
- If you have a lot of supplementary information, make it relevant and easy to follow. Number the pages by hand if it might help.
- Are all the claims prints available, including prior practices? Include a brief story for any open or large claims.
- Include a covering letter with a bit of background – your firm’s history, culture and aspirations; specialities of the principals; how you find, win and keep your clients. Humanise your practice for the underwriter, rather than making it a mere number-crunch for them.
One final tip. Can you reduce your PII programme exposure by using contingency policies that deflect losses from third party to first party? These are common in conveyancing but what about probate as well?
Renewal can be tricky and time consuming. With some preparation and commitment, you can emerge from the renewal season with a secure and cost-efficient risk transfer mechanism that can be relied upon. Please contact the team at Howden for advice and we will provide expert support across this process
About the Professional Indemnity Division at Howden
Howden has one of the UK’s most respected Professional Indemnity Insurance (PII) broking teams. We have the knowledge and expertise to look after businesses operating across a range of sectors and territories and believe firmly in the importance of developing strong relationships with our clients and insurers, based on honesty and respect. We are market leaders in many of the UK’s professional services sectors and our client base includes some of the world’s leading professional services firms.
Howden Insurance Brokers is part of the Hyperion Insurance Group, the world’s largest employee-owned insurance group. Originally founded in 1994 as a wholesale broker, Hyperion now has businesses across retail and wholesale broking and underwriting. Hyperion is a global business generating £400m revenue per annum from over 120 offices around the world. With over 3,000 staff worldwide Hyperion is the fifth largest producer at Lloyd’s.
