Professional Indemnity Renewal (PII) 2014
4th September 2014
As we come to the mid-point of the PII season, I thought I would review how things are going.
Anecdotally is appears that the SRA’s mooted reduction of limits of indemnity (LOI) to £500,000 has led to firms holding off renewing at the usual £2/£3,000,000 perhaps anticipating premium reductions. As we all know this is not going to happen, firms will need to renew for their usual level of minimum cover.
Policies are written on an “each and every claim” basis so the LOI covers an unlimited number of losses during the period of insurance. Outside of the very large firms, it is (just about!) unheard of for an insured to, say, have three total losses. What is much more likely is a series of smaller losses measured in the few £’000. Therefore, do the majority of UK law firms really need to have such high levels of cover?. As a ‘sop’ to both insurers and solicitors the bigwigs at the SRA have had the idea that allowing firms to insure at lower levels will reduce premiums and insurers’ exposure to potential costs. ‘Win win’ for all apart from maybe the consumer.
I cannot find any reliable statistics for claims reserved and claims paid but using our experience here at QLP, few claims exceed £500,000 and indeed most settle below £100,000. Underwriters will already have factored this into their premium calculations (fees, claims experience, areas of work) and any subsequent reduction in the compulsory LOI is unlikely to have any bearing on premium levels.
From a personal point of view, I would rather be over insured rather than under insured. Most people need some sort of insurance and hope that no claim is made as it means something has gone wrong. Having said that, in a claim situation I have never known anyone to say the premium is wasted?
Ultimately PII is a financial tool that protects the assets of a business, in other words your wealth, particularly if you are part of a traditional partnership. It also gives comfort to those using lawyers that if anything goes wrong, there is a means of compensation. Certainly it is common practice for solicitors’ corporate clients to take an interest and ensure their legal representatives are adequately covered.
We all know claims come from the most unexpected sources and can bite hard. Maybe, just once in a career, along comes the biggie. Full cover is a sleep easy, I am covered, no need to worry (well not about that anyway, plenty of other subjects to fret over).
Competitive quotes all around, if anything the running is good to soft (to use an horse racing term) with renewals around about last year’s levels, assuming things have not gone pear shaped over the last 12 months and you are getting the benefit of your premium.
N.B. The Law Society has commented that solicitors should not delay their Professional Indemnity Insurance (PII) renewal this year. Have you?