For many law firms, attorney professional liability (PII) insurance is a “set and forget” activity. They understand they need insurance but are less than enthusiastic about searching vendors to find the best deal.
This is especially true when you consider the current professional indemnity insurance market.
Rising premiums, a lack of new insurance providers, and the perception that existing providers have less appetite for new clients have left many law firms stressed at the prospect of applying for or renewing their professional liability insurance.
However, acc Frances Lodge, Deputy Vice President of Lockton Solicitors UK, who recently spoke to leading legaltech platform Clio on the subject, there is some good news and practical steps companies can take to reduce the stress and potentially cost of PII.
This article draws on Frances’ interview and outlines the current state of the market before highlighting why companies should still remain bullish – and what steps they can take to reduce their PII costs and application/renewal stress.
Market Conditions for Professional Liability Insurance
French said Clio:
“Recently we have seen some of the toughest market conditions with premiums steadily increasing. With no new insurers entering the market and insurers’ willingness to accept new customers has declined, some companies have had limited choice in their renewal.
However, we are now seeing some green shoots in the market as insurers are more willing to take on new customers and rate increases are starting to stagnate.”
However, these are far from the only factors that have rocked the market.
A costly policy, even in the best of times
Most attorneys will be aware that attorneys’ PII policies can be costly (especially compared to other professions). This is the case for several reasons. Keep in mind that this is the only policy that requires insurers to provide run-off coverage even if it hasn’t been paid for. While these costs are nothing new, it should be emphasized that finding professional liability insurance for lawyers can be a costly endeavor at the best of times.
claims are increasing
PII claims are increasing in both frequency and severity as assets and transaction values continue to rise. Clio reports that while about two-thirds of companies have no claims, those of the remaining third exceed the total premium that insurers collect from the industry as a whole. Unfortunately, this means that companies that have done little wrong have to find additional costs to prop up the market.
Why there is still room for optimism
Fortunately, it’s not all doom and gloom. As Frances explains, the market for professional liability insurance for lawyers is cyclical, which means the market will go down again – although no one knows exactly when. Frances points out that insurers are slowly becoming more willing to take on new customers compared to 12 months ago, which is certainly a positive sign. In addition, fee increases have also started to moderate.
It is also worth noting that certain sectors have been largely shielded from these stormy market conditions. For example, companies with good experience that carry out activities that are considered low-risk, such as special criminal law or labor law, remained comparatively unscathed.
How can companies reduce their PII premium?
While the market as a whole is not entirely under firm control, there are certain steps law firms and attorneys can take to minimize the impact of the market on their PII premium.
Invest in Legaltech solutions
Today’s Conveyancer reports that around 40% of companies that have adopted Legaltech solutions have received a discount on their professional liability insurance as a result.
But why exactly?
Leading legaltech platforms increase efficiency, relieve pressure on attorneys and create robust enterprise-wide processes. This leads to fewer errors — and therefore fewer PII claims. Lawyers, their clients and their insurers are happy. Everyone wins.
check existing processes
Of course, implementing Legaltech is far from the only avenue companies can turn to. Organizations should also review their risk management processes to identify potential areas of risk that could leave them vulnerable in the future.
Businesses can easily get used to processes they have relied on for years. However, no matter how well embedded these processes are, it’s crucial to step back and analyze whether they could be improved—and if so, how. Don’t be complacent and don’t believe that a method that has worked in the past will work again in the future.
For more details on creating an effective process for applying for or renewing professional indemnity insurance for attorneys, refer to this free PII guide.
Prioritize employee well-being
Stressed, overworked employees are more likely to make mistakes. It’s child’s play. Therefore, by promoting feel-good initiatives, regular contact with employees, providing training and encouraging continuous professional development (CPD), managers can ensure their employees are ready to perform the highest quality of work every day.
The legal sector traditionally has long working hours. For some firms, long hours can almost become a source of pride and create a toxic firm culture. However, if you’re looking to lower your professional liability insurance offering, neglecting the well-being of your employees could be a costly mistake, as Frances pointed out:
“The importance of employee well-being has come to the fore recently… with a common cause of complaints being overworked employees making uncharacteristic mistakes under pressure.”
Prioritizing employee health and well-being is one way to manage this risk.
Learn how to write clear, comprehensive proposals
The quality of a company’s proposal will have a major impact on the underwriting result. As French explained:
“With underwriters receiving thousands of requests for PII at each important renewal date, the quality of a company’s presentation can have a significant impact on underwriting outcomes. A clear and comprehensive proposal, well in advance of the renewal, together with a tailored cover letter, will convince insurers.”
Here are some tips for writing a successful proposal.
1. Cut off legal language
Make it as easy as possible for underwriters to read and understand what you are saying.
2. Provide a customized cover letter
Stand out from the crowd. Include key details about your typical customer base, internal risk management processes, and how your company consistently maintains its high operational standards. Better yet, go one step further and outline the challenges your organization is facing (and how you intend to deal with them).
3. Deepen your understanding of the PII market
Make sure you know exactly what insurers expect from companies, why and how to demonstrate those qualities. Read detailed PII guides for attorneys, such as: B. Clio’s free resource, A Guide to Solicitors’ Professional Indemnity Insurance, created in partnership with Lockton and reviewed to be updated as soon as possible.
Be proactive, not reactive
The market for professional indemnity insurance for lawyers is going through a difficult phase. However, that doesn’t mean companies should just sit back and hope it’s over. Instead, they need to take proactive steps to lower their premiums by making sure they submit clear, comprehensive proposals and constantly trying to improve their internal processes and technology. By doing so, they dramatically increase their chances of acquiring a more affordable PII policy that won’t break the bank.
This article has been authorized for publication by Clio as part consent to their advertisingment with Today’s Conveyancer. The views expressed in this article are those of the submitter and not those of Today’s Conveyancer.