Law firms closing due to lack of PI cover

Nine UK law firms have closed in the last three months as a result of their inability to obtain PI cover, according to Hazlewoods chartered accountants. In the preceding 12 months, a further 37 law firms had to close amid the rising cost of PI.

Hazlewoods says that, on average, the line of cover costs almost 5% of a law firm’s turnover. Firms in conveyancing can now pay as much as 20% of their turnover for cover.

Ian Johnson, associate partner at Hazlewoods, said: “The cost of insurance is becoming an increasing problem for law firms. This is particularly the case for smaller law firms who may not have the same risk management processes as large law firms and ones focused on conveyancing or other higher risk areas.

“With the number of insurers in the market shrinking and those still left increasingly risk averse, premiums could continue to rise. In order to mitigate any issues, firms should ensure that, over the next 12 months and beyond, they have a funding strategy in place to pay for these increasing premiums and have a strong handle on their financial forecasting so that they can plan for tough times ahead.”

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