Renewing professional indemnity insurance (PII) can be a long-winded and costly process. Here, Blake Hynds, Senior Client Account Manager at Wesleyan, the specialist financial services mutual for lawyers, discusses how to get the best terms at the best price.
The PII market has been competitive in recent years with some keenly priced policies available to law firms who shop around. This is largely because firms have become more adept at managing risk better resulting in fewer claims being made and therefore cheaper premiums.
Capitalising on a competitive market
Despite changes in the market in 2013 that opened up the timing of PII renewals, 68% of firms continue to stick with the traditional date of 1st October¹. However, the sooner you start the renewals process the more time you’ll have to prepare and find the best deal.
Completing the PII proposal form is a key stage of the process and so plenty of time should be allowed for this. Ultimately the proposal will give an insurer your view of risk. Answer questions in full, giving as much information as possible so that the insurer has all of the information they need to provide the best quote.
Understanding what the insurer looks for
When completing the proposal, there are certain factors that insurers will always consider when providing firms with a PII quote.
- Partner numbers – A number of insurers specialise in firms with four or less partners, and so the first test of an insurer’s appetite will be partner numbers.
- Fee income – It’s vital to provide the most accurate fee income figure and any significant changes, either up or down, should be explained to the insurer.
- Areas of practice – A firm’s key areas of practice will determine the cost of a PII policy. For example, personal injury and conveyancing are classed as high-risk areas, while criminal and family law are considered low-risk, so firms should make sure to state clearly what areas their fee income falls within.
- Previous claims history – Insurers will want to see at least five years’ updated claims information. Any previous claims won’t necessarily stop an insurer from providing PII, but they will want to understand all of the circumstances of any claims made.
- A robust approach to risk management – It’s important to demonstrate that risk management is embedded within the culture of the firm. It’s a myth that having certain accreditations, such as Lexcel, Conveyancing Quality Scheme and Investors in People automatically lower PII premiums. However, embedded and comprehensive Risk Management demonstrates to insurers that the firm is working towards a best practice standard.
Find the right broker for your needs
Make sure you’re aware of the best deals and be prepared to move insurer if you find a better deal. When talking to a broker, make sure you understand what they’ll provide you with over the course of the policy. If you need to make a claim, for example, will they represent you or will they outsource to a third party expert? If the latter, what are the credentials of their preferred panel of experts?
It’s also important that firms keep the number of brokers they ask for a quote to a minimum. Insurers can be put off if they receive a number of requests for quotations. Some brokers are tied into contracts with certain insurers so it’s worth checking whether your broker is independent and can access most of available market.
The information contained in this article is does not constitute financial advice.
Wesleyan provides specialist financial advice and services to lawyers and can provide guidance on reviewing your PII renewal. For more information, go to www.wesleyan.co.uk or call 0800 092 1990.
Wesleyan is the only endorsed finance provider to The Law Society of England and Wales and its members for both commercial and personal financial solutions.
Wesleyan’s flexible commercial finance solutions enable law firms to maximise their growth and support their cash flow against rising operating costs. These include flexible short-term expenditure funding for Tax, VAT, Practising Certificates and Professional Indemnity Insurance. The company provides medium-term loans which cover investment in technology and associated IT services including cyber and data security, in addition to long-term financial solutions to facilitate business mergers and acquisitions, commercial mortgages and partner buy-ins and buy-outs.