At Miller we had some very positive outcomes for both renewal clients and those coming to us as new business which shows that the market is becoming more receptive. Presentation is key to a successful renewal, which we will discuss further on in the article.

It is fair to say that some law firms faced difficult conditions and were presented with further rate increases for the third time.  In some instances, it can be argued that the premium increases were warranted as a result of a number of factors including adverse claims and a change in risk profile. 

Unfortunately, unprecedented claims conditions are continuing  to have an impact on Insurers and as a result a correction in the market has been felt necessary over the last few years.  The historic longtail exposure to claims continues to hurt Insurers with claims formalising from circumstances that were notified several years ago.  It will come as no surprise that conveyancing continues to be the biggest culprit for claim payments in terms of both frequency and severity.  Unfortunately, there is no one area in the conveyance process that is responsible for all the losses but a combination of all the classic mistakes like failure to secure a charge, failure to register title, missing a right of way etc. coupled with emerging risks that apply to this area of law.  Conveyance is not the only area though; commercial, probate and personal injury continue to cause losses.  It is fair to say that the last 2 years are unlike no other and there are fears that the pressures faced by the profession both professionally and personally could cause some significant claims issues.  This is all being factored into underwriting appetite and pricing. 

Green shoots in the PII market 

It is worth noting that it is not all doom and gloom and important to stress that there does remain active competition in the market and there are Insurers that are prepared to quote for all shape and size of law firm.  In our opinion each and every law firm is unique and should be judged on their own merits and not simply by the area of practice they undertake.  Each Insurer has its specific set of underwriting criteria and appetite, but in our experience, there are exceptions for the “right” firm and this is where using a Broker with expertise in Solicitors PII and renowned market relationships with Insurers will benefit clients’ from obtaining the best possible terms from the market. 

At Miller we believe in a collaborative approach to create controlled competition among those Insurers that are prepared to quote and who are suitable for your size and calibre of firm.  Restructuring your PII programme can have beneficial effects, not only on your premium, but also on your excess levels too and this is something that Miller is an advocate for. 

Having an in-depth knowledge and understanding of what the Insurers want also aids our ability to ensure that clients’ receive the best terms.  This means getting behind Insurers questions to ascertain what they are really concerned about.  It is usually a claim that highlights a new risk or area of concern, and this leads to a new set of questions.  The Miller approach is to pre-empt these concerns and answer their questions accurately and effectively before they are asked.  Our broking strategy is tailored for every firm ensuring that they are presented to Insurers in the best possible light.  This puts us in an invaluable negotiating position and adds true value in the broking process. It makes an Insurers job easier because they have everything they need at the outset and will lead to the best terms being quoted at the outset rather than a prolonged and often painstaking negotiation.     

Preparation is key

Do not leave your renewal application to the last minute!  

Every Broker irrespective of experience in this market will tell you this and never a truer word was spoken.  If you leave it to the last minute, you will instantly have a red flag against your name for the sole reason that you must have your Insurance in place to continue to trade.  The assumption being that insurance is business critical and therefore should take priority.   A late submission, slap dash proposal form, vague answers, lack of explanation/additional information is not going to do you any favours with Insurers.  A decent Broker will read your submission in full and give you advice on how it will be viewed by the Underwriter before it is presented to Insurers but be warned, not all Brokers do this and once your proposal form has been seen by an Underwriter and declined it is very difficult to change their mind.  It is also worth noting that there are a limited number of Insurers in this market and therefore consistency is paramount!  

Guidance on preparing for your PII renewal 

1. Starting the renewal process early is key for every firm but especially for those with claims.  Insurers will focus on financial viability and risk management controls and systems to understand your firm and how you manage risk. 
   
   
2. Provide a fully completed proposal form and use the notes sections – do not use phrases like “you know it”, “you already have this” “the broker has it” etc.  In some instances, it is fine to rely on the fact that you have already provided information, however, we would recommend you simply refer to this in a covering email rather than in the body of the proposal form.    
   
   
3. Use the proposal form as your shop window to present your firm – it is your opportunity to sell yourself.  Ensure your proposal form is legible, handwritten forms can be difficult to read and lead to ambiguity for Insurers, which you do not want. 
   
   
4. Explain what you do – many areas of law are ambiguous. For example, a commercial practice could literally be doing anything.  Some commercial work is extremely high risk and charged accordingly. If you explain what you do, and for whom, an Underwriter can make an informed decision to lower the rate which results in a lower premium. 
   
   
5. Provide narrative on both past and present claims.  This should include a brief synopsis of the facts, the current position, potential quantum and perhaps most importantly what lessons have been learnt as a result, and what preventative measures have been put in place to prevent a reoccurrence. Undertake a review of your claims experience with your Broker and get old/dormant notifications closed.  
   
   
6. If the firm has not had any claims or notifications, it’s worth talking about why. I.e. tight controls, client selection process, KYC controls, checklists etc.  It is expected that firms will make notifications and this on its own will not damage your risk profile or prejudice your position with Insurers.  Whilst a clean claims record is fantastic and is often a result of good risk management, depending on your area of law, notifications are expected, and it could be wrongly assumed that you have simply not notified matters and dealt with any issues internally which is a breach of your policy conditions.   
   
   
7. If appropriate prepare a Risk Management Submission which would include how you identify and mitigate risk, the culture of the firm, client onboarding and selection plus processes and procedures – Miller can help you with this. 
   
   
8. Provide a covering letter with your application – this is viewed favourably by your Insurer and can address a variety of points including fluctuation in fees, new area of practice, new hires, changes in structure, future plans, proposed investment in IT etc.  

The question on everyone’s mind – will there be any new capacity 

Following what Insurers have described as a price correction over the past couple of years, rates are now at a high enough level to attract new Insurer capacity to the market.  However, the SRA’s Minimum Terms and Conditions are a deterrent with Solicitors still having the widest cover compared to all other professions.  An issue for Insurers is the fact that they are obliged to offer a 6-year run off period which means that financial security is fundamental to their underwriting rationale.  Unfortunately, there are some firms that do not close their doors in an orderly manner, be that by financial difficult or intervention, and therefore their run-off premium remains unpaid. This has an impact on Insurers and ultimately has an impact on those more prudent firms.  

As a result, some Insurers have taken the step of getting personal guarantees from equity partners to protect themselves against this eventuality.  There are several other hurdles, not least of which are an Insurer not being able to avoid claims for dishonesty or misrepresentation.  Furthermore, there is increasing exposure to cyber claims which should never have been covered under a PII policy in the first place.  

Our prediction is that any movement on these topics will be very slow indeed, largely because the SRA and Insurers fundamentally disagree on these points. With this in mind, we are unlikely to see any new capacity in the market in the immediate future. However, appetite is increasing and with the right submission and appropriate messaging of your risk, we can invite existing Insurers to potentially quote terms and generate controlled competition in the market.