Be Ready: PII Renewal Issues
With the next Professional Indemnity Insurance (PII) renewal date looming on the 1 October, here at Today’s Conveyancer, we wanted to look at the current market conditions and renewal issues, so solicitors are fully informed and prepared.
With a global pandemic, which resulted in the UK being put into lockdown, speculation of a looming recession, and question marks over Brexit negotiations, its not surprising that a cloud of uncertainty hangs over the legal sector.
Naturally, legal professionals are looking for reassurance and assistance when seeking PII cover this Autumn.
At a recent webinar about PII we garnered guidance and information from industry experts who are fully equipped to guide you safely through PII obstacles in these challenging times.
Brian Rogers, Regulatory Director, at The Access Group helps law firms meet their regulatory obligations, in order that they can focus all their energies on their clients. He was one of the expert speakers at the webinar.
He highlighted the importance of being aware of the Solicitor’s Regulation Authority (SRA) requirements and risk management procedures.
In particular, he highlighted the following SRA Principles;
- Principle 2 – you act in a way that upholds public trust and confidence in the solicitors‘ profession and in legal services provided by authorised persons.
- Principle 7 – act in the best interests of each client.
Other points that Brian touched upon, included:
- It is also advisable for firms to have the appropriate insurance in place, especially if solicitors have opted to operate as freelancers.
- You must monitor and manage all material risks to your business and its crucially important to supervise matters due to huge issues around Covid-19.
- The extended policy period (EPP) runs for 30 days from the expiry of the previous policy cover, with the cessation period (CP) running for a further 60 days from the expiry of the EPP. You can continue to operate as normal during the EPP whilst seeking cover but if you are unable to get it then you move into cessation period. During the CP you must not move your business forward as you are effectively in a wind down period. If you do continue operating, you are likely to face investigation.
- Those law firms who are unable to secure insurance because of Covid-19 can prolong the extended period with regulatory permission.
- It has been reported that some solicitors have had difficulty with communicating with their brokers, with some people suffering illnesses and some people requiring more finance.
If you get this wrong, you will be penalised for it.
Brian Rogers said, “In the current insurance market it is key for firms to prepare early and tell a good story about their businesses that will show insurers they are a risk worth taking on; don’t just tick boxes on proposal forms or answer questions as briefly as you can”.
The webinar also touched upon the capacity insurers currently have for existing and new customers.
Some insurers have exited the market, resulting in the premium rate increasing.
It was found that firms that were insured with exiting insurers were hugely impacted, along with Covid-19. The insurers’ pricing was not sustainable and so they exited the market.
What the insurer exits didn’t do was to reduce the number of firms struggling to find insurance, with a number of remaining insurers no longer having an appetite to grow their portfolios.
Additional take away points
Below is a list of additional takeaways from the webinar for lawyers:
- The renewal process is taking a lot more time and resource than usual, with requests for additional information being made during the underwriting process. Pricing negotiations are also taking longer.
- Cost of the insurance for the compulsory layer increased by 10-15%. Firms with higher risk exposures experience higher insurance increase. There have been geographical variations for some firms
- Significant reduction in the extended policy terms – 50-60% decrease.
- Reduced willingness from insurers cost increases made the option less inviting Insurers applied additional cost for longer period
- Vastly inflated excess layer premiums
- 75-100% increase in the later between compulsory limit and £10M
- Brit insurance held large market share – exited due to poor performance of portfolio – the claims that were emanating from the excess layers weren’t matching up
Some of these points were also covered in the insight to PII renewal interview that Edward Donne from Howden’s Professional Indemnity Insurance Brokers.