10 FAQs for law firms renewing their PII in 2023

1. 

What is happening with PII premiums?

In 2023 we saw PII premiums for law firms continuing to increase, but the main driver for this was the uplift in gross fees firms reported. There was a “flattening of the curve” in terms of rate and the increase in average rate was back to single digits. Increased appetite and competition for law firms perceived to be a good risk also resulted in more stable premiums for some.

We expect this trend to continue in 2023, however there is one major caveat to this – the wider economic landscape.

For a more in depth discussion of this we refer you to our latest Market Report for Law Firms published in January 2023 and available here.

2.

Our gross fees from residential conveyancing have dropped considerably in the last financial year. Does that mean our premium will reduce?

It would be unwise for firms to reduce the amount they have budgeted for PII at this point. Given that PII policies are written on a “claims made” basis, underwriters must continue to cover you for all past liabilities and will therefore still need to consider gross fees (and the activities they were derived from) in recent years. 

However, as always, Howden will be working hard on behalf of clients to negotiate the best possible premium. We have published a separate article dealing with this issue in more detail and we would recommend it to firms that undertake conveyancing. It is available here. Given the uncertainties we also encourage you to keep talking to us as your next renewal approaches, so you can stay informed of ongoing developments.

3. 

Our gross fees for conveyancing have increased, but our transaction numbers are still the same, how will insurers deal with this and how will it affect our rating. 

Insurers rate on fees as opposed to transaction volumes, however the scenario described is a point we would always highlight with insurers. We would argue that the risk is unchanged and press very hard for insurers to make an appropriate adjustment to reflect this.

4.

Will having a cyber policy in place help with our PII renewal?

Law firms, whether big or small, are a target for cyber criminals. Be in no doubt, your PII insurer is very concerned about cyber security given the potential for cyber incidents to lead to client loss that then becomes the subject of a PII claim.

We are seeing more questions on PII proposal firms relating to this issue and some PII insurers are making their quotations subject to confirmation that a firm has a Cyber Policy in place.

A Cyber Policy provides first party cover, for example enabling you to source the expertise needed to get your systems up and running to resume service to your clients following a hack or outside intrusion.

5. 

Do insurers still have an appetite to offer PII for solicitors – and are there any new insurers we could consider?

The good news is that we still have plenty of A-rated insurers who continue to offer PII to law firms and we are expecting new capacity to enter the market in 2023.

However, some insurers are becoming more restrictive in terms of appetite. Conveyancing work as a percentage of gross fees, financial stability and cyber security are some of the issues insurers are focusing on. 

You need to keep talking to your broker about any changes to the “red lines” for your insurer and others in the market you might want to consider approaching for an alternative quotation.

6. 

Are short proposal forms likely to be available at my next renewal and are they a good idea?

Some insurers have advised that they are prepared to accept a short proposal form for selected renewal clients, but this is very limited. Your broker will be able to tell you if it is an option for your firm.

However, while a short form can save you from a great deal of time and agony, it can limit your ability to source alternative quotations in the market. A full proposal form will usually be required for another insurer to offer a firm quotation.

So, even if a short form is an option, you might want to consider completing the full form to avoid a last minute scramble if you decide to go to the market for alternative quotations.

Your Howden broker will be able to talk through these issues with you to help you make the best decision for your firm.

7. 

How long before the renewal date should our PII proposal form be completed and how long will it take to get a quotation?

Ideally, we recommend that your proposal form should be completed and ready to submit to us no less than six weeks in advance of your renewal date. Firms generally find that they take longer to complete their submission than anticipated, so set your timelines carefully and particularly the deadlines by which you require others in your firm to provide you with the information you need. Don’t let their procrastination become your emergency.

The time that it will take to get a quotation varies from insurer to insurer. Your broker will be able to tell you when they expect various insurers to start issuing their quotations. We are conscious that some insurers have been very late in quoting at recent renewals, but this is all the more reason to make sure that you are at the front of the queue. 

We are also mindful that while the hard market continues, some insurers have more limited capacity and that is another reason to ensure you do not leave things to the last minute.

8.

What should we do if we don’t collect data in a way that enables us to answer some of the questions asked on the proposal form?

Pick up the phone and talk to us. We can discuss the issue with you and the potential for your firm to provide the information in a way that is compatible with your systems, but still addresses the risk issue that insurers are concerned about.

Likewise, if you are unsure what the question is asking and how to answer it, then answer to the best of your ability and explain both your understanding of the question and your response in a covering letter.

9. 

What can we do to demonstrate to insurers that our firm is a good risk?

A well-completed renewal submission is a good start to attracting the attention of your insurer for the right reasons. 

Take time to ensure that you are providing all the information insurers are asking for on the proposal form and provide additional information where you think that is needed to further explain or justify your response. Where narrative answers need to be given make sure that your answers are clear, concise and address the issue. 

We also encourage you to submit a supplementary document or letter to assist in showcasing your firm. This is an opportunity to detail issues such as new risk management initiatives, a change in the strategic plan or even a change in management that could be relevant to the assessment of risk. 

Resist the temptation to repeat information that is already included in your answers on the proposal form. Stick to those issues that are likely to make a difference to the assessment of risk and if your claims history is less than stellar, this is an opportunity to explain additional background to insurers, challenge any reserves and advise what changes you have made in the firm to prevent the issue arising again.

We recommend our recent article: “Showcase your firm with additional information at renewal” available here.

10. 

We are discussing plans for our firm to be acquired by a larger practice, but it won’t be completed before our renewal date. What should we do? Will we get a refund if we cancel mid- term?

There are various options in this scenario. You could renew as usual and then cancel if and when the acquisition proceeds. The potential issue with this option is whether insurers will allow a refund when you cancel. Insurers differ in their approach to this issue and if you need to notify any claims or circumstances under the policy prior to cancellation, then a refund is unlikely. In any event a return premium would only be available to you where the acquiring firm became a successor practice and the need for run off was negated.

If you do renew as usual and then take “elective” run-off prior to the acquisition, it may be possible to negotiate an improved position such as asking for early cancellation of the current live policy and putting any available return premium due to you against your run-off policy. Again this can vary between insurers.

An alternative option is to ask insurers to extend your existing policy for the time you need, with additional premium being calculated pro-rata based on your expiring premium. Even if insurers insist on a premium uplift, this is still a practical solution. Renewing for a short period is also permitted under the rules and offers a similar solution.

We should also mention the Extended Policy Period (60 days) and Cessation Period (30 days) that enable a firm to continue to practise in circumstances where they have not been able to renew their PII. We would not recommend this option. It is not the purpose for which the extension was designed, insurers are not kindly disposed to it and you are required to notify the SRA – you might want to avoid attracting their attention in this way.  If the acquisition does not proceed, then the cover required to continue the practice would need to be backdated to the expiry of your last policy. This could be difficult and expensive, or in the worst case scenario even impossible, particularly if you have had a claim in the intervening period.