A short analysis of what The Law Society’s 2014 professional indemnity insurance survey findings say about small firms’ experience of securing cover last year.
The Law Society published the results of its annual professional indemnity insurance renewal survey in mid-April, presenting encouraging feedback for small-firms in particular. Solicitors generally found the process easier, with more firms being able to obtain affordable, rated insurance.
The small-firms sector, traditionally under catered for, particularly benefitted from the increased presence of rated cover, with a large number of firms presumably forced to turn to unrated insurers previously able to switch. This was reflected in the figures the report presented with 83% of firms selecting rated cover in 2014, up from 77% in 2013.
Fortunately, it appears that small firms are heeding the warnings posted by the Law Society to avoid unrated insurers after the 2013 renewal process was wrought with difficulties caused by the abrupt failure of Latvian insurer Balva. Balva was the most recent example of an unrated insurer collapsing and followed the downfall of ERIC and Lemma in 2012 and before that; Quinn Insurance in 2010.
Smaller firms responding to the survey said the biggest influence to their purchasing decision was the financial rating of the prospective insurer from Standard and Poor’s or A.M Best, rather than simply the cost of the policy. Thankfully, firms were delivered a respite as the survey showed that premium levels largely remained flat, while trade during the period was spurred by a growing UK economy.
The additional capacity of rated insurers clearly contributed to a reduction in the number of firms being forced to enter the Extended Indemnity Period. Numbers fell from 287 in 2013 to just 39 in 2014. The survey has also shown that firms have appreciated the variable renewal date introduced in 2013, with 19 per cent of respondents having taken out a policy outside the traditional 12-month duration. Our own experience reflects this.
One fifth of survey respondents did however indicate that they found the renewal process difficult, primarily because of the time it takes to submit a proposal. Half of all firms responding to the survey indicated that they spent up to a month between preparing proposal forms and agreeing to take out a policy.
The survey also exhibited that half of firms reported benefitting from utilising one of the Law Society’s free to-use online support services during their PII renewal preparations. Smaller firms were more likely to have found at least one of the support services useful with 49% of sole practitioners and 52% of 2-4 partner firms indicating they had benefited from them.
Our experience is that solicitors are often paying excessive commissions to brokers for freely available advice on solicitors’ professional indemnity insurance. A quarter of firms responding to the survey reported that no level of service was prior-agreed with their broker and a further 9% were unsure what level of service was agreed. A sizeable 44% of firms reported that their broker did not disclose their commission at all.
If you have questions about the results of the survey or have an approaching renewal deadline and would like to speak to a professional indemnity specialist, please request a callback from Six Clerks.