Professional Indemnity Insurance market update – Legal Services

During the past few years, the Professional Indemnity Insurance (PII) market has experienced a sustained period of premium increases and restrictions in coverage which have ultimately led to insurers dramatically curtailing their risk appetite. After several years of these consistently hard conditions, we have seen the market come full circle to a softer PII environment. In this market update we will explore our PII market experience during the October 2023 renewal.

Our August 2023 state of the market update described how we were seeing a much less volatile landscape with insurers having undertaken their price correction exercise over the course of the hard market conditions. Subsequently, the rate growth trajectory has continued to slow and, in some cases, retract. Having concluded the October renewal we are incredibly pleased to note that current market conditions are the most favourable seen by our law firm clients in the last five years. There is evidence to suggest that the market is transitioning from a hard market to a softer PII environment. During soft market conditions clients are able to negotiate lower insurance premiums, as insurers compete for business. When the insurance market hardens, premiums rise as insurers adjust what they may consider inadequate rates.

In April 2023 we were able to successfully leverage competitive tension amongst qualifying insurers which resulted in rate reductions for several clients. Utilising this strategy for the October 2023 renewal meant that several clients experienced rate decreases, between 5-15%, and some clients saw premium reductions despite a growth in fees.

Insurers must balance their growth targets against responsible underwriting. Due to competitive tension being realised and having exited the hard market conditions, insurers have retained clients they are comfortable underwriting and would be reluctant to see ‘walk out the door’ due to premium savings. We have utilised the insurers with significant growth targets to drive down premiums for our clients, who, in some cases have had significant claims payments in the last policy period.

Our proactive and bespoke broking strategy is designed to obtain the most optimal renewal outcomes for our clients. Ways in which we can help are:

• Providing insurers with completed proposal forms and any additional information as early as possible gaining the full benefit of time and thus giving brokers the opportunity to negotiate extensively and obtain the best possible terms.
• Understanding that underwriters are keen to identify how law firms have adjusted to the evolving risk landscape. In particular, how firms have adjusted to conducting business remotely, whilst maintaining quality and supervisory standards. We have also seen insurers place a much greater emphasis on understanding the firms’ financial hygiene and stability as well as sanctions checking processes and protocols.
• Continuously articulating to our clients that time should be spent in collating/refreshing/refining risk management policies and procedures aimed at reducing the risks associated with normal day to day operations. A robust risk management strategy goes a long way towards demonstrating to insurers that the law firm are fully aware of, and proactively managing its risk profile.
• Highlighting the value in developing good practice to maintain a record of all claims, circumstances and ‘near misses’. This will enable law firms to articulate the lessons learned and the policies and procedures that have been enhanced to prevent repeat occurrences.

Becoming a trusted partner, enhancing the typical client/broker relationship to ensure that when WTW are appointed as your broker, we take the time to understand your firm, and the holistic approach that an underwriter may take. Building this relationship is crucial and allows us to provide the best possible representation.

To complement the broking strategy, our claims advocates undertake a full analysis of your claims experience to evaluate the true cost to insurers over differing time periods. This assists in challenging both the retention, and premium, allowing us to provide our clients with additional comfort and confidence that their premiums are appropriate for the level of risk being transferred.

We understand that robust risk management is imperative for the growth and security of any well-run business, and this goes beyond the procurement of insurance and is core to our business. Our risk management specialists are on hand to support our legal sector clients with identifying, understanding, and enhancing their existing risk mitigation policies, controls, and procedures and supporting them with complying with their regulatory and legislative obligations.

We organise a range of events throughout the year to provide senior stakeholders an opportunity to hear presentations from industry leaders, discuss best practice and network with like-minded colleagues. We recently hosted a seminar on exploring artificial intelligence, and its usage by professional and financial service providers, including law firms, which focused on the opportunities and challenges businesses face.

As market conditions continue to improve, we believe there is an opportunity for many law firms to capitalise on the pricing and capacity available. We would be delighted to have a conversation with you about how WTW may be able to help your firm take advantage of the current favourable conditions.

Author

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Babbar Abbas

Senior Associate - PI FINEX Legal Services

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