Beware increasing the self-insured excess on your PII
Many firms are experiencing premium increases as a result of changing market conditions.
Any increase in premium may cause some firms to reflect on whether they can increase their self-insured Excess to contain their PII spend. We urge caution with this approach.
You need to consider the following points:
1. Always consider the amount by which an increase in your self-insured excess in fact reduces your premium. Firms often find it does not achieve the level of reduction they expect. You need to decide whether it is worth the risk and how quickly the saving will be cancelled out and potentially exceeded in the event of any claims activity.
2. Affordability is critical. If a claim or claims arise during the policy year, will you be able to afford the Excess payment(s)? What will your financial position be if you have more than one claim?
3. In the event of the Excess being unpaid to a claimant within 30 days of its becoming due for payment, then upon request from the claimant, the insurer must pay the Excess on your behalf. This can have significant consequences for your firm, as follows:
- The underwriter is likely to be concerned about the financial stability of your firm, which could impact adversely on the view they take at the next renewal. You might find that underwriters no longer want to offer terms, or will only do so with a reduced Excess and a higher premium.
- If an Excess is unpaid then there could be regulatory consequences for your firm. The SRA recently rejected a request from insurers to remove the rule requiring them to fund the Excess in the event of non-payment but indicated they would consider what action they might take in those circumstances.
4. A number of proposal forms in the market include a question directed to whether the firm, or any individual in the firm, has ever failed to meet any Excess payment. A failure to pay could, therefore, haunt you or your firm for years to come.
Howden is a specialist PII broker in the legal professions market.
Our client base comprises over 1500 legal services firms from sole practitioners to Top 100 firms. Given our size in the market, we have a strong negotiating position with insurers, which we use to the best advantage of our clients. We have direct access to the majority of Participating Insurers with either exclusive or enhanced access to 5 “A” rated insurers.
We invite you to contact us if you have any queries in relation to this bulletin or would like to discuss PII and related insurance products for your firm.
Written by Jenny Screech, Consultant, Howden PII.
Find out more about our PII for the legal profession.