In this article, John Jones, MD of Champion Professional Risks – our specialist Professional Indemnity Insurance (PII) division – talks about the impending PII renewal season for solicitors. This includes the considerations to be made and the pitfalls to avoid for Solicitor Practices when looking at their Professional Indemnity placement.
Up until 2014 all Solicitor Practices renewed their PII on the same day each year but this was abandoned as it was too chaotic and Solicitor Practices are now free renew their PII cover at any time during the year. Because of this many insurers started offering firms 18 month policies to move them away from this congested renewal date. However a significant number of Solicitor Practices still remain on the 1st October renewal date.
For the 2020 “season”, market conditions have not improved with the exit of a number of insurance providers such as AON/Maven, China Re and Omnyy meaning that there is less capacity and the remaining insurers are being more selective than ever. We are also experiencing dramatic increases in the cost of Excess Layer (top up) insurance.
COVID-19 has only served to place additional stresses on the market as the tough economic environment increases the credit risk significantly for insurers who provide Professional Indemnity Insurance for Solicitor Practices. When underwriting your policy, insurers will want to focus in on the effects of COVID-19 on your practice and will want to drill down into the following areas:
- Your business continuity plans including the impact of home working on the functions of the business
- Details of staff redundancies, furloughed staff and reduced hours
- Your financial stability, for example pre COVID fee income and profit forecasts vs post COVID, balance sheet and borrowings
- Any projected changes to the types of work carried out and your competencies in these new areas of work
It is clear that it is not a “buyer’s market” for Solicitor Practices procuring Professional Indemnity Insurance, and so it is crucial that you present your firm in the very best way possible to secure favourable terms. We’ve compiled a few pointers to help you along the way:
It is imperative that your Proposal Form is completed thoroughly, neatly and with care. In view of the complexities of these forms, we would recommend that a senior person completes this task in collaboration with all other stakeholders in the firm. This person needs to understand the business and the risk associated with the firm’s activities.
First impressions really do count here and can actually be the difference between obtaining a quotation from an insurer, or not. If the form is untidy or obviously completed without too much care, what message do you think this gives to the underwriter, who is expected to insure the quality of your work or advice?
We would always recommend that a Proposal Form is in typed form so that it is easy to read and looks more professional than a handwritten submission.
Insurance broker selection
Ensure that your broker has the relevant qualifications and/or experience in dealing with Professional Indemnity insurance. Professional Indemnity insurance can be complex and you need to ensure that your broker understands the cover, and the market. It can be beneficial to use a specialist Professional Indemnity broker.
Another benefit of using a specialist broker is that insurers may be more comfortable with presentations received from a specialist and might be willing to put forward a more competitive quotation.
Avoid ‘Flooding the market’
Asking lots of brokers for quotes might seem like a good way to “cover the market” and get the best terms possible. But remember that brokers are middle men and will often use the same insurers. So, if you do this, an underwriter may receive your submission more than once from different brokers. This is known as ‘flooding the market’.
Flooding the market will turn many underwriters off as they will realise that the chances of them actually winning your business is diminished significantly if there are lots of insurers and brokers involved. Instead they’ll focus their limited resources on cases that they might actually win and are likely to “No Quote” your submission.
Our advice is to select a broker who you can trust and who meets your criteria and work with them to secure the best terms from the market. If you want to engage with more than one broker, limit the number involved, and try to manage which insurers are being approached.
Only target suitable insurers
A scattergun approach rarely yields the best results in any aspect of business.
Insurers keep a log of historic quote requests and will get tired of seeing the same cases each year. So if they see that they have quoted for your business before and haven’t won your business they will be less inclined to put forward a serious quotation or may simply provide a ‘no quote’. This can work against you where an insurer’s appetite changes, over say a three year period, and they’re actually now an ideal fit for your business, but they’ve now grown tired of seeing your quote requests. We recommend that you work with your broker to only target those insurers who are likely to have a strong appetite for your business at that point in time.
To find out more, get in touch:
John Jones, managing director at Champion Professional Risks Limited
T: 0330 128 9828
M: 07769 823 483