Representation and presentation – key to successful renewal of your solicitors’ PII
The first half of this year has been hugely challenging for all law firms with a myriad of management and risk issues to be dealt with.
Many firms have had to deal with furloughing, negotiating pay cuts, reducing working hours, all the while endeavouring to maintain a high standard of service to their clients. Business Continuity Plans have been stretched to their limits and the task of returning to work whilst managing social distancing will present even greater logistical challenges.
PII is another issue that will challenge firms as their renewal falls due over the next 12 months, whether that be 1 October, 1 April or any other date. Insurers have adjusted rates following a significant increase in the number of larger claims against the profession in recent years. They are also concerned that the current crisis will lead to an increase in claims against law firms and result in some law firm failures. When a law firm fails, insurers are required to provide run-off cover for a period of six years, even if they do not receive the premium. Given this backdrop to forthcoming renewals we expect that rates for PII are likely to continue to rise throughout 2020. Whilst this paints a very gloomy picture there are things firms can do to help manage their PII costs throughout this challenging period. The way in which a firm is represented in the insurance market and how they present themselves to insurers can sometimes be the difference between success and failure.
It has never been more important to be represented by experts who not only have a proven track record of working with law firms, but who also have access to, and influence with, insurers. Find the broker that is right for you, one you trust to navigate your firm through the process; one that gives you the personal attention you deserve. This is a time for specialist market professionals.
Over the past 12 months there has been massive consolidation in the global broker space. As a result, many law firms are likely to experience disruption in their service teams. All this at a time when you need a team 100% focussed on your needs.
Do your research. Make sure you select a broker who has experience of working with law firms. Your broker will be representing you and your business so it is imperative you choose a broker you trust and who gives you confidence that they will present you strongly to insurers. A good broker will steer your firm through the current challenges affecting the PII renewal process. But a great broker won’t stop there. They will continue to keep you updated on important factors and regulatory changes affecting the market throughout the year to ensure you are well informed during, after and right on until your next renewal.
Some of the questions you should ask a prospective broker are as follows:
- Are you a specialist PII broker?
- Which insurers can you access?
- Can you access insurers directly or do you have to use other brokers to access some or all of them?
- Do you have any special or exclusive arrangements with any particular insurers?
- Do you have an up-to-date Solicitors Proposal Form and Business Resilience (COVID-19) Questionnaire that will be accepted by a number of markets?
- How quickly can you submit my application and get an answer?
- Do you have access to a finance facility to fund the premium?
- Do you have a claims team to provide assistance if a claim is made against us?
- What other support and assistance do you provide during the year?
The Law Society has published further guidance on choosing a broker and information about the role of a broker. This is available here
A more recent update, specifically related to Covid-19 is available here
At Howden we believe we tick all the right boxes. We are a specialist Professional Indemnity Insurance broker and we have a team that is dedicated to the legal sector. Our team is one of the largest in the UK, managing insurance on behalf of a broad range of over 700 legal practices, from sole practitioners through to the UK’s top 100 firms. We have direct access to “A-rated” insurers including some exclusive arrangements. We also have a dedicated claims team and regularly support our clients with information, updates, seminars and webinars on issues related to the legal profession.
Building relationships with insurers has always been important. To do so, firms need to grab insurers’ attention with a strong renewal presentation. There is a new rigour amongst insurers. They are actively seeking to select the best quality law firms and each firm should focus on demonstrating the quality of its risk profile.
Working closely with our clients, Howden has a reputation for providing excellent renewal submissions. We take time to review submissions carefully before they are submitted to underwriters so that we can anticipate any issues or identify areas where more information is required. For the 1 October 2020 renewal insurers are particularly interested in each firm’s financial resilience and approach to new risk issues related to lockdown and remote working. We are working with our clients to ensure that they are providing the level of information we know insurers will need.
Proposal forms require a great deal of information and take time to complete. Investing time and attention to their completion is important and we highlight the following key points:
- Ensure the form is legible and complete using the electronic format if at all possible.
- Include any supplementary information in a style that can be easily assimilated, with a clear reference to the numbering of the associated question on the proposal form.
- Ensure that the numbers add up. Underwriters don’t mind if you round off your income split between activities to whole numbers or calculate it to three decimal places – just as long as it adds up to 100%.
- Up-to-date claims records from previous insurers should be attached to the form, including those for any prior practices. The number of years you need to go back varies from one insurer to another, although six years is a good starting point.
- If your firm does not record information in a way that corresponds with questions that are asked, then talk with your broker about providing the information that you do record. Provided it addresses the issue that the insurer is interested in, then this should not be a problem.
- Take care with Yes/No questions. The answer the insurer is looking for is usually obvious. If it clearly requires a “yes” answer and you are unable to give that, don’t worry. It might be that you can give an explanation that will still satisfy the insurer. In that case, you should put a note on the form to refer the insurer to your supplementary pages where the information can be found.
- If your claims record shows significant claim payments or reserves, offer an explanation within your supplementary information. A few lines on the circumstances, your thoughts on liability in respect of open matters and any other points where you feel that the hard facts on the claims print do not truly reflect actuality can help.
- Tell underwriters if you have been able to learn from claims, close loopholes, tighten procedures, introduce new systems or in any other way alleviate the chance of recurrence. Underwriters will look for this if your claims record is less than stellar.
- Be your own best advocate. Firms often complain that the proposal form doesn’t give a complete picture of their business, or allow them to demonstrate why their firm is a better risk than others. That is a fair comment and we encourage firms to include a letter or a separate note setting out information about the firm that doesn’t emerge from the answers on the proposal form. Be concise – two to three pages is enough.
- Ensure you comply with your duty of fair presentation under the Insurance Act. Double-check your proposal form carefully and ensure that you have disclosed all material information including any claims or circumstances that you have not yet notified.
Some of the above guidance might seem very straightforward, but even small things can make a difference and it is surprising how often some of these issues are missed. Regardless of market conditions, optimising your renewal presentation goes a long way to securing a successful renewal.
Written by Jenny Screech LLB (Hons)
Legal Consultant, Howden PII