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PI expected to plateau for large law firms
Written by Editor, CIR
Top law firms in England and Wales are set for a year of flat premiums or at least minimal increases for their professional indemnity (PI) insurance on the 1 October renewal deadline due to market competition, according to broker Marsh.
Sandra Neilson-Moore, European practice leader for Law Firms' Professional Indemnity at Marsh, explained: "We are still seeing substantial competition among insurers for large firms' business, due to their low frequency of claims and good risk management procedures. Premiums for firms with good claims records are likely to stay flat this year, while others may experience an increase of around 5% in some cases.
"However, insurers' income for solicitors' PI has not grown at all over the past five years. Insurers would like to increase rates and make more of a profit on solicitors' PI, but this is unlikely to happen in the current climate.
"Large firms are preferring to stick with existing insurers, in recognition of the value of the ongoing relationship. Some may opt to take higher excesses on to share some of the burden of defence costs, if they want to achieve premium reductions."
While the market is likely to remain relatively flat for larger firms, Marsh believes that small and medium sized firms are facing more challenging conditions this year.
Commenting on conditions for smaller firms, Andrew Jackson, a managing director in Marsh's FINPRO National Practice, said: "Historically some smaller firms have left it to the last minute to secure cover. However, this year they cannot afford to take this risk as fewer insurers are now taking on smaller firms and may close their doors early if they have secured sufficient premiums.
"If smaller firms leave their renewal late this year, there is a distinct possibility that they could end up in the Assigned Risks Pool, creating a blot on their record and making it more difficult for them to obtain cover in the future."
According to Marsh, claims relating to the recession are on the rise. For larger firms, the highest number of claims currently relate to failed transactions, while for smaller firms claims most commonly relate to property and lender matters.
Sandra Neilson-Moore explained: "In the boom times, work was plentiful and was completed very quickly, meaning that some mistakes went unnoticed. Now, in leaner times, firms are facing increased scrutiny.
"When there are claims, advantageous settlements are often being negotiated out of court, as plaintiffs don't have sufficient funds for long, drawn-out disputes and would rather have the cash now rather than later."
In the run-up to the 2009 renewal deadline, Marsh recommends:
-buying early to avoid not securing cover and ending up in the Assigned Risks Pool
-demonstrating how well the firm manages its risks