Gareth Milner, Managing Director of JM Glendinning Professional Risks, comments on the solicitors’ PII market for 2023:
In recent years, almost all law firms have encountered significant increases in their professional indemnity insurance (PII) premiums. PII is normally one of the highest expenses for solicitors and any increase in the premium flows straight through to your bottom line, so controlling this cost is vital.
We’re pleased to report better news in relation to PII for 2023. There is still a little uncertainty from the volatile wider economic conditions, but it seems that the tougher measures imposed by insurers over the past few years have now stabilised the market somewhat.
On 1 April 2023—when around 30% of law firms renewed their PII—most insurers offered flat rates, meaning any premium increases were purely in line with increases in fee income. Any rate increases applied were in the low single digits, usually for practices with higher risk work such as conveyancing. Predictably, the exception to this was for firms with a poor claims record, where insurers still sought above average rate increases.
For the 1 October renewal season, we are expecting this rating trend to continue. We are also seeing an increase in insurers’ appetite for new business, which will serve to create more competition. This in turn also naturally regulates premium.
We are also likely to see at least one new participating insurer writing solicitors’ PII before October. Any appetite from new insurers remains to be seen, but we expect their initial approach to be ‘easy does it’ to ensure sustainability in the market. So, while new capacity is always very welcome, it is likely to be 2024 before we feel the full effects.
If your firm has its PII renewal due on 1 October, how should you approach the market?
Firstly, we must make clear that the softening market conditions are very much in their infancy, so the chances of cutting great swathes off last year’s bill are unlikely.
Through sensible negotiation, the chances of striking a better deal are much improved this year, either with your existing insurer or an alternative. During the recent hard market conditions the majority of law firm stayed with their existing provider and while there are many benefits to that continuity, it is good governance to periodically test the market. The next year or two are likely provide the right timing for that market check.
When the market starts to improve, the potential for leaving money on the table is greater, so you must ensure that any market exercise undertaken by your broker is transparent. Agree beforehand which insurers have be approached and then collate each of their responses, so you know that when you sign up for another renewal, you are getting the very best deal available. Ask your broker whether they are tied to any exclusive deals with insurers or if they are giving you a truly independent, balanced view of the market.
More insurers are now prepared to offer 18-month terms, too. If you are interested in having an extended period, ask your broker if this is available and check what the terms of any extended deal would be.
The quality of risk information provided could be the difference between an insurer choosing to quote or not, so when submitting your proposal ensure that you include as much positive information about your firm’s processes and attitude to risk as possible. Key areas of focus for insurers are the financial management of the business, staff training and culture, and how cyber risk issues are mitigated.
With the correct approach to renewal, we do believe that most firms should be able to contain premiums and increase competition among insurers for their business during 2023 and beyond.
If you would like a discussion regarding your PII renewal, please don’t hesitate to get in touch with me on 07923 246 237 or gareth.milner@jmginsurance.co.uk.
JM Glendinning is a sponsor of the Yorkshire Legal Awards 2023.
Josie Geistfeld
Josie Geistfeld is Editor of Yorkshire Legal News. She welcomes comments and questions.