Act Now On PII Renewal Warns Law Society
The Law Society for England and Wales have sent out a rallying cry to the legal community, encouraging them to act now on their professional indemnity insurance (PII) renewal.
Most firms still renew their PII on the old common renewal date of 1 October. This has always created a bottleneck, with underwriters and brokers rushing to process proposals to meet the deadline.
Simon Davis, President of the Law Society in England and Wales, said:
“Covid-19, the uncertainty of Brexit negotiations and the fact the market was hardening already in 2019 all combine to mean that October 2020 could be the most challenging period for solicitors since the insurance market opened up in 2000.
“First and foremost, firms should already be talking with brokers about finding cover. If you have not done so, it should be made a priority now.
“Insurers are reluctant to take on new risks just now and many are not seeking new clients. This cautious approach means firms will be expected to provide more information up-front, such as details about risk management, firm finances, continuity planning and evidence of ongoing profitability.
“There will also be additional questions about how the lockdown and Covid-19 have affected business, including redundancy plans, furlough scheme use, home worker supervision and the steps that have been taken to minimise risk.”
The Law Society expects almost all firms will see increases in their premiums this October, particularly if coming out of an 18- or 24-month policy.
The April renewal revealed that larger firms faced some of the biggest increase in premiums. One study conducted by Lockton International found that firms’ premiums increased by an average of 15%, but firms with turnovers of £50 to £100 million saw increases of around 40%.
Simon Davis added:
“Firms should brace themselves for an average increase of 30%, but those with bad claims histories should expect far higher increases.
“If you find yourself particularly adversely affected by the imposition of lockdown, talk to your broker about how best to make proposals to prospective underwriters.
“We also advise firms to review budgets and make the necessary adjustments to account for increased premiums. If firms have not sought premium financing previously, it may be worth considering in the current circumstances.
“PII premiums can be a hefty up-front cost and having the ability to spread out payments over a longer period will help with cash flow.
“One possible source of finance could be subsidised loans from the Coronavirus Business Interruption Loans Scheme, which provides businesses with an annual turnover of up to £45 million, access to loans of up to £5 million, repayable over six years.”