How to keep your PI insurance costs down

1. Why is PI so expensive?
2. What are the main aspects of my firm that affect the premium?
3. What types of legal work increase premiums the most (and least)?
4. Is Covid-19 still affecting PI insurance premiums?
5. What is an appropriate level of coverage?
6. PI insurance works on a claims made basis. How does this affect me?
7. What is the ‘Armageddon scenario’ of aggregated insurance claims?
8. In light of the cost, should I consider lowering my limit of indemnity?
9. How do I show insurers that my law firm is good at managing risk?
10. How can I present our financial position and viability as a business accurately and fairly?
11. My firm has a government bounce back loan. Will this be viewed negatively by insurers?
12. Will having Lexcel, CQS or other relevant qualifications reduce my PII cost?
13. I am thinking of diversifying into a new area of legal practice. What impact will this have on my PII?
14. I am going to stop doing conveyancing, will my PII premium reduce immediately?
15. If a partner or a team moves to another firm, will my PII premium reduce?
16. Why is the size of my fee income important to insurers?
17. My fees are dropping, will my premiums fall?
18. I have had another year of no claims, will my PII premium drop?
19. Why does the number of partners/directors/members matter?
20. Are sole practitioners seen as an unattractive risk by insurers?
21. How can I benchmark my premium?
22. What other insurers can I consider?
23. What should I consider when switching insurers?
24. What premium payment options are available?
25. How much of my premium is retained by the broker?

 

The PI insurance application process

25. Why am I being asked to complete a ‘long’ proposal form this year?
26. Do I have to complete a different proposal form for each insurer?
27. How long will it take to provide me with insurance quotations?
28. When should I submit my insurance renewal presentation?
29. What should I do if my insurer is not offering renewal terms?
30. This year, why are some insurers delaying their quotations?
31. Why do I have to complete a proposal form each year?
32. Can I buy a policy for a longer period to move away from bottleneck renewal dates and fix the cost for longer?
33. Why do insurers want to see my Report and Accounts?
34. Why do I need to provide up-to-date claim summaries every year?
35. If I have a claim, what do insurers look for?
36. If I notify a potential claim, will my insurer increase the premium at next renewal?
37. How far back do I need to report claims history as part of my presentation of risk?
38. Why do I need to provide a narrative about a past claim if that fee-earner has left so it won’t happen again?
39. Why am I being asked for information including claims for a business I acquired nearly five years previously?
40. Do I need to tell insurers that I am hiring a new fee-earner?
41. If I have a data breach, should I report it to my PI insurer?
42. What is a ‘circumstance’ and why do I need to notify it?
43. When should I notify a potential claim?
44. Do I need to notify complaints?
45. Can I arrange a face-to-face meeting with you as a broker to allow our wider team to discuss renewal?
46. Are face-to-face meetings with insurers possible via Zoom or Teams, to explain more about our firm to them?
47. My PI insurance is arranged with several insurers in layers – how do you ensure that any claim is handled satisfactorily?
48. Will I prejudice my firm if we go into the Extended Policy Period (EPP) briefly?
49. What are benefits of a broker having ‘direct insurer access’?
50. When might we be asked to provide personal guarantees?

 

The four experts

Law Firm Ambition is grateful to the four specialist legal sector insurance brokers who collaborated with us to come up with this long list of FAQs and answers. (Updated 22 August 2025)

 

Brian Boehmer is a partner at Lockton.

 

Neil Pointon is a divisional director at Howden.

 

Gary Horswell is the managing director of Ntegrity.

 

Dan Blundell is a senior vice president at Paragon.

 

 

How to keep your PI insurance costs down

1. Why is PI so expensive?

The cost of professional indemnity insurance (PII) reflects the combination of market dynamics, regulatory requirements and claims experience.

The mandatory nature of PII, coupled with the breadth of cover required under the SRA’s Minimum Terms and Conditions, places insurers under considerable pressure to price risk conservatively. This is particularly the case for firms undertaking higher-risk areas of practice, such as conveyancing, where systemic risks and high claim volumes persist, as well as for firms with poor claims histories.

Insurers consistently cite poor profitability in the solicitors’ PII market, which is exacerbated by long-tail liabilities, the open-ended nature of defence costs, and limited scope to aggregate claims.

Despite some recent easing in market conditions, insurers still view solicitors as a high-risk profession.

Neil Pointon, divisional director, Howden

2. What are the main aspects of my firm that affect the premium?

Broadly speaking, when an insurer is making their risk assessment, four main factors impact the insurance premium:

1. Activity profile – What work and how much of that work is undertaken. For example, residential conveyancing is high risk in terms of both the volume of claims and the cost of claims, so it tends to attract higher premiums.
2. Client base – Who you act for, and the values of transactions.
3. Claims – Your claims and regulatory track record.
4. Risk management – How your practice uniquely mitigates the risks associated with your specialism(s).

 

 

 

Other factors come into play. Partner numbers, the number of offices, and the ratio of supervisors to staff may or may not turn out to be important. For example, if a partner has to supervise a large number of fee-earners in more than one office, it tends to be more difficult to prevent mistakes being made – so the risk of claims may be greater. Your firm's online presence may also affect the way an insurer views your firm.

Well-run firms (with lower PII premiums) tend to have a corporate identity, rather than acting as a group of individual lawyers, and have a culture of continual improvement.

Brian Boehmer, partner, Lockton

3. What types of legal work increase premiums the most (and least)?

The table below shows a general view of how insurers perceive the risk of providing different types of legal services. High risk (either due to the volume of claims, or value of claims, or both) leads to high professional indemnity premiums.

However, the pricing of insurance varies. The underwriters have developed their own models of risk, influenced by their own personal professional experiences as well as by the data. And some insurers specialise in particular types and size of firm, too.

Source: Lockton Companies LLP

Brian Boehmer, partner, Lockton

4. Is Covid-19 still affecting PI insurance premiums?

PI insurance premiums were steadily rising (see 1) before Covid-19 arrived on the scene. Rather than the pandemic directly affecting the pricing of premiums, it has reduced the appetites of insurers to underwrite a large volume of legal sector business – which affects premiums indirectly.

Given the widespread fear of a major and long-lasting economic difficulties, and the historical fact that claims activity in the legal sector tends to increase in recessionary times (and for a little while after), insurers can be expected to be careful to limit their exposure. These harder market conditions may last for a longer period than the legal sector has been used to in the past.

The impact has not turned out to be as severe as first thought, however, we still do not have a fully developed claims position following the impact of COVID. Therefore, although the market is softening, we should remain cautious. Losses may appear later than when they would usually be expected.

The most obvious impact of Covid-19 was the marked increase in the amount of information requested by the insurers. On a positive note, forms including Business Resilience Questionnaires and Excess of Loss are largely being replaced with a limited number of specific questions in the proposal form, often based around hybrid working.

Dan Blundell, senior vice president, Paragon

 

"We need to understand what has changed from a risk perspective. So, with the switch to hybrid working, a firm could elaborate on how they are maintaining supervision and embracing cyber security in this new situation."
James Graham, director of professional indemnity, Travelers

 

5. What is an appropriate level of coverage?

SRA regulations make your firm responsible for assessing its exposure to risk and purchasing the appropriate level of professional indemnity insurance (PII) cover in general, for both current and past work.

Every firm is different, but factors to consider include:

• The nature of activities undertaken that could expose your practice to risk, including any contractual obligations.
• Your claims history.
• The maximum and average amount of money in the client account.
• The insurance cover of firms similar to yours, as shown by any benchmarking.
• Any risk of aggregation (see 7), or another worst-case scenario.

Depending on your firm’s structure, you will be required by the SRA to buy a primary policy providing at least £2m or £3m limit of indemnity (LOI). (See 8)

Many firms purchase limits above the mandated level. This is normally where the transaction values are above £2m or £3m, or where aggregation might result in a group of claims being treated under the policy as one single claim (and therefore one single limit, see 7). In many cases clients require firms to hold certain LOI to be eligible for instruction. If this is for a one-off piece of work, consider doing a cost-benefit analysis of it.

Your liability does not end when the instruction does. So, if you buy an increased LOI for a project, you may need to continue this increased limit for a number of years to protect against any later claims.

Brian Boehmer, partner, Lockton

6. PI insurance works on a claims-made basis. How does this affect me?

Solicitors’ professional indemnity insurance (PII) operates on a claims-made basis, as opposed to a loss-occurring basis (such as for home or car insurance). This means that cover is triggered at the date a claim is made against a firm or a claim ‘circumstance’ (potential claim)is notified to insurers, as opposed to when the act or omission in question took place.

This places an emphasis on prompt notification. Firms must report claims and circumstances to insurers as soon as they become aware of them, as failure to do so can lead to coverage issues with your insurer.

It is also a factor when considering the appropriate level of cover for your firm. For example, if your firm historically handled high-value work but no longer does so, a claim arising from the high-value work could occur several years after the work was undertaken, so you may need to retain a higher limit of indemnity for many years (potentially 15 years under the Limitation Act 1980) after moving away from that work before considering reducing your insurance cover.

Neil Pointon, divisional director, Howden

7. What is the ‘Armageddon scenario’ of aggregated insurance claims?

There is an aggregation clause contained within the SRA’s Minimum Terms and Conditions that applies to all legal sector PI insurance.

This clause potentially allows for two or more claims to be treated as a single claim, if they are linked by a unifying factor of some kind.

For example, take a firm with a limit of £3m. In theory it would be covered for three separate claims of £3m each, adding up to £9m. But if a single item of negligent advice, repeated many times to different clients led to 10 claims of £1m each, the insurer would only have to cover the first £3m if the 10 claims could be shown to be aggregated. The remaining £7m would have to be paid by the law firm.

The risk of aggregated claims underlines the importance of conducting a proper risk assessment of your firm’s activities. Otherwise, simply relying on the SRA’s minimum level of cover can leave you under insured.

(A point of detail on dishonesty: Current case law suggests that a series of dishonest acts (eg by a solicitor in the case of Baines v Dixon Coles & Gill) does not automatically constitute a single, aggregated claim.)

Brian Boehmer, partner, Lockton

8. In light of the cost, should I consider lowering my limit of indemnity?

Some firms may consider reducing the limit of indemnity (LOI) to save money. But with market conditions improving and rates becoming more competitive, there is less pressure on law firms to do so.

The SRA dictates the minimum LOI a firm is required to buy. For a partnership it is £2m; whereas it is £3m for a Limited Liability Partnership (LLP), or a limited company, or an Alternative Business Structure (ABS). But many firms choose to purchase an LOI that is far greater than this, to reflect the risks that they are exposed to.

Some clients may contractually commit your firm to have a particular LOI. If you fall below this limit you may be in breach of contract.

All PII policies are written on a claims made basis. This means a claim can arise from work the firm undertook the past. An insurer’s obligation to pay a claim is set by the cover in place when the claim is made, not the cover you bought when the work was undertaken.

Without the correct LOI in place, you could be exposing the partners/directors of the firm to a significant amount of personal liability.

One alternative is to reduce the level of high risk work the firm undertakes, as this will impact the premium over time (see 3).

Dan Blundell, senior vice president, Paragon

9. How do I show insurers that my law firm is good at managing risk?

Bearing in mind the four main factors that insurers focus on when reviewing a firm (see 2), you should explain:

1. Your awareness of the risks inherent in the types of work performed.
2. Named individuals who manage risk within the firm.
3. Any helpful investment, eg an improved case management system.
4. Management processes that red-flag any danger signs that an issue has arisen.
5. Any external review processes, such as a quality standard that has been achieved.
6. Other steps taken by the firm to limit the chances of a claim (‘risk mitigation’), such as periodic reviews of risk management.
7. Continual practice improvement, learning from any claims activity to avoid recurrence.

Insurers tend to quote lower premiums where firms evidence that risks are managed well and consequently there is less chance of a claim.

If the questions asked in the insurance proposal form do not allow you to explain these key points, use your covering letter to explain them more fully (and refer to the covering letter in your form).

Gary Horswell, managing director, Ntegrity

 

"What we like to see is a document outlining the firm’s approach to risk and what initiatives they have implemented to mitigate risk. And, where there have been claims, what lessons have been learnt and what changes have been implemented to prevent a reoccurrence."
Donna Hurst, senior underwriter, Travelers

 

10. How can I present our financial position and viability as a business accurately and fairly?

Insurers’ proposal forms ask for copies of the latest year-end accounts, and some will also request management accounts including budgets for the future.

It is helpful to also provide an overview of your financial position in your own words. For example, if you took advantage of one of the government loan schemes or a permitted VAT deferment, say so and explain why you decided to do so – rather than waiting for an insurer to ask about it.

The better the information provided, the more confident the insurer will be in your ability to control the finances of the firm. If you fail to disclose relevant information, your insurance may even be invalidated.

If your financial position is precarious or complicated, seek advice from your accountant.

Brian Boehmer, partner, Lockton

11. Will having Lexcel, CQS or other relevant qualifications reduce my PII cost?

Holding accreditations such as Lexcel, CQS, SQM or other recognised risk management accreditations can positively influence how an insurer perceives a law firm as a risk, but it is not a guaranteed route to lower PII premiums.

For certain areas of work, such as conveyancing, having such a qualification is standard (as almost all lender panels require firms to have CQS). But recent reports that 70% of firms fined by the SRA for anti-money laundering breaches in the previous 12 months had the CQS accreditation laid bare the fallibility of such ‘best practice’ schemes.

Insurers ultimately price risk based on claims experience, work profile and overall exposure. Accreditation alone is unlikely to offset concerns arising from an adverse claims history or concentration in high-risk areas of practice. That said, firms with recognised accreditations which can show that they have embedded robust systems for risk management into their practice and have good claims histories which demonstrate this may benefit from more favourable insurance terms in competitive market conditions.

Neil Pointon, divisional director, Howden

12. I am thinking of diversifying into a new area of legal practice. What impact will this have on my PII?

If you are moving into a new area of practice, or planning to add a new team to your firm, you should inform your broker as soon as possible. A new department or area of work is deemed ‘material to a risk’ from an insurer’s perspective, so the insurer should be made aware of the planned change. Keep a record of the notification to the insurer.

Moving into a new area of work does not automatically mean additional premium. Even if you do diversify into a new area of work mid policy, it may not affect premiums if no revenue will be realised during that period. Nevertheless, always inform your broker to ensure you do not prejudice your position with the insurer.

If a new area of work is undertaken which you expect to generate significant additional revenue (+10%), then it is likely that the firm can expect some change in premium. The area of work will have a large influence on this (see 3).

Dan Blundell, senior vice president, Paragon

 

"Involving an insurer early in the planning of particular changes within a firm can minimise risk and build trust. For example, closing a conveyancing department, securing run-off cover in preparation for a merger or acquisition, or expanding into a new practice area."
James Graham, director of professional indemnity, Travelers

 

13. I am going to stop doing conveyancing, will my PII premium reduce immediately?

No, because your premium is covering your firm for claims arising for work undertaken previously (unless run-off cover was purchased to insure this past work).

Professional indemnity insurance is provided on a claims made basis, and a client loss that leads to a claim may not be realised for some time.

It is perfectly normal for an insurer to pay a conveyance claim from work undertaken four or more years ago, even if that firm stopped doing conveyancing three years ago.

However, in this scenario, the likelihood of a claim arising, and therefore the insurer’s exposure, reduces each year the firm is not undertaking conveyancing. So over time the premium should reflect this change.

Gary Horswell, managing director, Ntegrity

14. If a partner or a team moves to another firm, will my PII premium reduce?

This depends on whether the departing partner or team takes the past liability of their work with them (so the entity they are moving to becomes the ‘successor practice’), or not.

If not, your practice remains liable for any claims arising from work undertaken before they left your practice. As professional indemnity insurance is on a claims made basis, including any new claims made for work undertaken in the past, your premium is unlikely to reduce until significant time has passed with no claims arising.

If the past liability moves to the successor practice, there is potential to reduce your premium in respect of this reduction in risk to the insurer.

The successor practice rules are complex and often misunderstood. Seek guidance from the SRA and professional advice, then put a contractual agreement in place to provide clarity on this point between the parties involved.

Brian Boehmer, partner, Lockton

15. Why is the size of my fee income important to insurers?

For PII insurers, the size of a law firm’s fee income is a key indicator when assessing risk exposure and premium levels. PII underwriters “rate on fees”. Put simply, they apply the premium rate they calculate as appropriate for your firm, based on factors such as areas of practice and claims experience, to your gross fee income (usually for the last completed financial year).

Insurers use fee income to assess the scale of a firm’s operations, the nature of its client base and the likelihood of a large claim arising from the type of work undertaken. It also informs decisions around excess levels, coverage limits and the scope of any risk mitigation measures required.

Fluctuations in fee income can also influence underwriters’ perception of risk. A firm with rapidly growing income may trigger closer scrutiny, particularly if growth is concentrated in higher-risk areas such as conveyancing, commercial litigation or corporate finance. Conversely, a declining income may prompt questions about financial sustainability.

Neil Pointon, divisional director, Howden

16. My fees are dropping, will my premiums fall?

As explained in 14 above, most claims come from past work rather than current work, so an immediate drop in the premium is unlikely. But, over time, lower fees do equate to lower premiums.

However, the average pricing of PI insurance in the legal sector goes up and down depending on the level of competition between the insurance companies (see 1). This may be a more important pricing factor than your firm’s own level of fees.

Gary Horswell, managing director, Ntegrity

17. I have had another year of no claims, will my PII premium drop?

Another year without claims is a positive indicator for insurers, but whether it translates into lower PII premiums depends on several factors (see 1 and 2).

It can also depend upon the areas of practice in which your firm operates. For example, firms working in low risk areas such as criminal law or immigration will typically have no or very few claims – so this is already priced into insurers’ rating models.

In a ‘hard’ market – characterised by reduced insurer appetite, capacity constraints and elevated reinsurance costs – even firms with exemplary claims records may experience static or increased premiums. Conversely, in a ‘soft’ market a clean claims history may support more favourable terms. Ultimately, it’s about presenting your firm as a well-managed low-risk proposition – and that takes more than just a year free of claims.

Neil Pointon, divisional director, Howden

18. Why does the number of partners/directors/members matter?

Insurers use partner numbers (salary and equity partners) as a key metric for segmenting the legal market. The segments are sole practitioners, 2-3 partners, 4-10 partners, and 11+ partners. Some insurers will only insure firms of a particular size.

The ratio of partners to staff is also a factor in understanding the level of supervision of staff, and therefore the risk level.

Dan Blundell, senior vice president, Paragon

19. Are sole practitioners seen as an unattractive risk by insurers?

Sole practitioners are generally viewed as a higher risk by insurers, rather than an unattractive risk, although this view is nuanced and varies across the market. Research commissioned by the SRA and LSB found that smaller firms faced significantly higher premium rates relative to turnover compared to larger firms.

Insurers perceive sole practitioners as having inherent risks such as limited resources, less robust risk management infrastructure and greater vulnerability to financial shocks. Sole practitioners may also lack succession planning and face challenges in maintaining financial stability. Furthermore, the administration costs of processing a large volume of low-value premiums deters some insurers.

From a claims perspective, however, sole practitioners generally perform much better than larger firms, and insurers recognise that the vast majority operate successfully within defined risk parameters. So those insurers with the appetite and capability to process volume business actively pursue sole practitioners, which account for 16% of all law firms in England and Wales.

Neil Pointon, divisional director, Howden

20. How can I benchmark my premium?

Professional indemnity insurance remains one of the biggest costs that a law firm faces annually. So it is normal and reasonable to seek an evaluation of the market.

A specialist broker may have suitable benchmarking data, depending on their client portfolio. Or you can ask you broker to get quotes from different insurers, to compare.

Some firms are part of a network of law firms and use these contacts to benchmark their insurance.

You could do the benchmarking yourself, by speaking to multiple brokers and explaining that you are conducting a benchmarking exercise.

But be wary of ‘broker duplication’ (the same insurer seeing your proposal form from two different sources), as this can damage your firm’s reputation with both brokers and insurers. Give clear instructions about who the broker is permitted to speak with on your behalf.

Brian Boehmer, partner, Lockton

21. What other insurers can I consider?

Your broker will be able to suggest which insurers are suitable for your firm.

Different insurers tend to specialise in insuring particular sizes of firms. Likewise, one insurer may have particular expertise in, say, personal injury and will focus on PI firms, while another insurer limits the percentage of PI revenues to 20% and yet another insurer may choose to avoid PI firms altogether.

Some insurers can only be accessed via a particular insurance broker or limited number of brokers.

If you are shopping around, avoid being tied into any relationships until you are satisfied that you have found the right insurance solution for your firm. While the premium price is an important factor, how they handle claims and what they charge for run-off cover could also be important considerations.

Most insurers operating are now rated. The higher the credit rating, the more financially stable those insurers are – which can turn out to be critically important (see 22). No broker can guarantee the financial solvency of any insurer.

Brian Boehmer, partner, Lockton

22. What should I consider when switching insurers?

Whilst 'cost' may be the first thing that occurs to you, it is by no means the only, and arguably not even the most important, factor when considering switching insurers. Almost all law firms now use brokers to assist them with their PII renewals, as very few insurers now accept what is known as 'direct business' (law firms approaching them directly).

As such, important issues to consider with your broker are:

• What is your broker's perception of the insurer?
• How long has the insurer been in the solicitors' PII market?
• Is your firm a good 'fit' with the insurer's typical underwriting appetite (so is a long-term relationship with the insurer possible)?
• How does the insurer handle claims (do they handle them in-house, or outsource them to a panel law firm and, if so, who)?
• Does the insurer offer any covers over and above those required by the Minimum Terms and Conditions (eg loss of documents, court attendance costs, regulatory defence costs)?
• Does the insurer offer any additional benefits (eg risk management support, training, thought leadership)?

An insurer's financial rating also used to be an important consideration. However, following the 2008 global financial crisis a number of unrated insurers who had entered the solicitors' PII market failed spectacularly, leaving thousands of firms without insurance. Thankfully, there have been no entrants to the market by non or poorly-rated insurers in recent years (the market is effectively policing itself in this regard, as the SRA declined to regulate to require a participating insurer to have a minimum financial rating), so this factor is not currently of significant concern.

One final point to consider is that insurers do not look favourably on firms which regularly change insurers merely for the sake of a cheaper premium. There is a lot to be said for continuity with one insurer so that, if your firm does suffer a large claim, you will have built up a premium 'pot' with that insurer which will help to protect your firm from premium volatility at subsequent renewals.

Neil Pointon, divisional director, Howden

23. What premium payment options are available?

Most brokers have a recommended finance provider that can offer terms to their clients. Payments are usually in 10 or 12 instalments for a 12-month policy, or 16 or 18 instalments for an 18-month policy (when the latter is available).

Some insurers offer these facilities too. Alternatively, ask your bank what options they can offer.

Interest charges (APR) vary widely, so check the costs involved.

Gary Horswell, managing director, Ntegrity

24. How much of my premium is retained by the broker?

PII brokers for law firms typically retain around 15% of the premium as commission. However, this figure can vary depending on the broker’s business model, the complexity of the placement and the volume of low-premium applications they handle, in which case this figure could be higher.

The broker’s fee is in return for providing specialist value-added services to law firms, which go far beyond simply placing cover. These services include:

• market access and placement
• risk assessment and profiling
• renewal strategy and presentation
• regulatory and compliance support
• risk management support
• claims handling and advocacy
• ongoing advice during the term of the policy

Not all PII brokers are the same, however, and having the right broker on your side is as important as having the right PII insurer (arguably more so). Do your research to find the broker that best fits your firm’s profile and aspirations

Neil Pointon, divisional director, Howden

 

The PI insurance application process

25. Why am I being asked to complete a ‘long’ proposal form this year?

Despite improving insurance market conditions, prudent insurers continue to be cautious, reflecting the current economic environment along with the high level of claims and the risks that the legal sector faces. Their underwriters are seeking a deeper understanding of each law firm before agreeing to insure it.

Some firms may have gone many years without completing a ‘long’ proposal form; for example, low-risk niche practices that have benefited from an early, short renewal declaration. Many of these firms are now being asked for full information, partly because of market conditions but also because it is now required from a regulatory perspective.

Brian Boehmer, partner, Lockton

 

"By submitting a separate summary of the firm’s risk management approach and culture, you can make it easy for the underwriter to understand this key factor."
James Graham, director of professional indemnity, Travelers

 

26. Do I have to complete a different proposal form for each insurer?

If you have a broker which has its own proposal form, this will normally satisfy the vast majority of insurers. If not, the proposal form will usually be from your incumbent insurer and this may not include some questions required by other insurers. However, if there is any missing information then insurers are usually happy to accept a covering letter or similar document answering any additional questions required, rather than requiring you to complete another full proposal form.

Neil Pointon, divisional director, Howden

27. How long will it take to provide me with insurance quotations?

It depends on the timing of the submission of the proposal.

The common renewal dates are October 1^st and April 1^st. Leading up to the busy October renewal in particular, different insurers will begin to provide quotes at different times (once they have decided their strategy). Until that moment, any proposals submitted are in limbo.

The whole insurance process is taking longer than it did previously, as insurers are seeking more information on which to base their decisions. Examples include Building Safety Act work, the use of AI, verification of overseas entities and work for politically exposed or sanctioned individuals. The depth of enquiries depends on the type of firms being insured and varies from insurer to insurer.

Terms can sometimes be received as quickly as 24-48 hours, or it could take a couple of weeks or longer. Ask your broker about the likely timing.

If you avoid the traditional October renewal and switch to a different date (see 32), you should have less risk of delayed quotations.

Gary Horswell, managing director, Ntegrity

28. When should I submit my insurance renewal presentation?

It is advisable to have your proposal form submitted to your broker, along with any additional information, at least two months before the renewal date. The broker will then check that all the necessary information is there.

This leaves plenty of time to provide any further information the broker, or the insurer, may request.

It also leaves time for your broker (or other brokers you speak to) to get alternative quotes.

Generally speaking, the closer it gets to the common renewal dates of October 1^st and April 1^st, the busier underwriters become.

Certain insurers are offering some firms in their portfolios an early renewal rate reduction, usually around 5 - 7.5%.

Dan Blundell, senior vice president, Paragon

 

"While submitting an early proposal doesn’t guarantee a lower premium, it allows more time for negotiation with the underwriter, presents the firm as a more attractive risk, and will help the firm find more insurers willing to quote."
Donna Hurst, senior underwriter, Travelers

 

29. What should I do if my insurer is not offering renewal terms?

If you are not offered renewal terms by your existing insurer, you must act swiftly to secure alternative cover at the earliest opportunity. First, find out the reason for the decision, as this will inform your strategy for finding alternative cover. Second, discuss your options with your broker. You may need to engage two or more brokers to maximise market reach, or ask your broker to approach insurers which specialise in certain firm profiles, such as those which are conveyancing-heavy or are sole practitioners, even if this may come with a rise in premium.

If it appears that you are not going to be obtain alternative insurance at all, you may need to consider merging or selling your firm to another firm which is willing to take it on and which does already have insurance, or you may have to consider closing your firm.

Under the SRA Indemnity Insurance Rules, a firm has 90 days from expiry of its current policy to find alternative insurance. During the first 30 days (the Extended Policy Period ('EPP')), the firm can continue to practise in the normal manner while it looks for insurance. The final 60 days must be spent closing the firm in an orderly manner and no new instructions can be taken on during this period. You must also notify the SRA within 5 days of entering the EPP.

Neil Pointon, divisional director, Howden

30. Why are some insurers delaying their quotations?

It can be normal for some insurers to delay giving quotations during the busy run-up to the October 1st and April 1st renewal dates, until they have assessed the current market conditions, established their own underwriting strategy and made sure they have adequate staffing levels.

Some insurers may not even open for new business until August, while they first manage the workload of their non-solicitor business.

Meanwhile, other insurers may choose to quote early on, to renew low risk business on favourable terms.

Some insurers and brokers may also delay releasing terms as a tactic, in order to retain business, while others will quote early with a short time-limit. This helps the insurer to avoid being used as a stalking horse.

In a softening market a delayed renewal offer is less likely. Challenge your broker on the reasons for this, should it occur.

Lastly, following lockdown, working patterns in the office are more flexible and the employees of the insurers typically work remotely at least two days a week. As a result, the internal process of agreeing rates can take longer than in the pre-Covid era.

Dan Blundell, senior vice president, Paragon

31. Why do I have to complete a proposal form each year?

Risk levels have risen in recent years and insurer's pricing strategies have changed. So insurers need clear, detailed, up-to-date information on the level of risk in each firm. This allows them to price the risk correctly and to justify that pricing to the brokers and law firms.

It contrasts with recent years in which many insurers had asked a renewing law firm for a simplified declaration, to confirm there has been no significant change to last year’s application form (ie less than a 10% increase or decrease in revenue or work type, and no expected claims).

(Brokers have searched in vain for years for a better way to profile a law firm and its risk features, but the proposal form remains the standard solution. The annual task of renewing insurance should in any case firstly be an internal review of all risk – to prevent mistakes happening and claims arising – and secondly a fair presentation of the firm and its risks to the insurer.)

Gary Horswell, managing director, Ntegrity

32. Can I buy a policy for a longer period to move away from bottleneck renewal dates and fix the cost for longer?

The availability of longer-term policies largely depends upon market forces. In the recent hard market, longer-term policies all but disappeared as insurers became very strict with their underwriting criteria. However, when the market started to soften again during 2023 they started to reappear and now it is not uncommon to have a policy period longer than 12 months. The vast majority of these are 18-month policies, but a policy can in theory be as long or short as you may wish (subject to the insurer’s consent).

It is therefore possible to shift your renewal date from the bottleneck periods of April and October with a longer-term policy. However, insurers are equipped to deal with the significant increase in work during these two periods. That said, there may be a unique aspect to your firm for which it would make sense for you to renew outside the busy renewal periods, so that an insurer has the time to give your presentation the consideration it requires. Your broker will be best placed to advise you in this regard.

Neil Pointon, divisional director, Howden

33. Why do insurers want to see my Report and Accounts?

Viewing your accounts gives an insurer insight into the solvency of your firm. This is particularly important for insurers of law firms due to the SRA’s Minimum Terms and Conditions, which contractually binds the insurer to provide six years’ run-off cover, regardless of whether the premium is paid or not. So, if a firm goes out of business, the insurer still has to pay out on any successful claims made during that six years.

A firm’s accounts can also give insurers an idea of how well the finances of a firm are managed, which in turn are an indication of how well the firm in general is managed. Well managed firms are less risky to insure.

Brian Boehmer, partner, Lockton

34. Why do I need to provide up-to-date claim summaries every year?

Your claims history is a key factor in insurers’ calculations of PII premiums. As well as setting out your firm’s historical claims record, it is used to calculate the likelihood of any future claims you may suffer, and their likely values (essentially how much insuring you is likely to cost them).

Solicitors’ PII claims take much longer to develop than other areas of insurance such as car or home insurance, and it can be several months before any reserves are posted against open claims. The reserves then change over time, as each claim develops.

This is why insurers require up-to-date claims summaries (usually no more than three months’ old), to input into their rating models to calculate your premium.

Neil Pointon, divisional director, Howden

35. If I have a claim, what do insurers look for?

In the event of a claim, insurers take two actions.

Firstly, they ascertain liability and the potential lines of defence. Insurers know that many notifications made under a policy are spurious and/or robustly defendable.

Secondly, if a genuine error has been made that has led to the claim, they will want to look at how that happened and will seek reassurance that the error isn’t an inherent issue that will result in multiple claims originating from the same error.

Your law firm should explain in a few sentences the background to how the claim came about. Importantly, explain what risk management procedures or additional supervisory processes have been introduced to mitigate a similar problem occurring in the future.

From an insurer’s point of view, a firm that has had a claim can be a better risk than a firm that hasn’t, if the former now understands the exposure and has taken measures to control it.

If your firm has a more active claims history with numerous notifications and claims stemming from one department you will need to show what you have done to control this. For example, a 100% case review, or a partner supervising the work more closely, or even letting a mistake-prone fee-earner find other employment.

Brian Boehmer, partner, Lockton

 

"Get to the heart of a claim by asking yourself five “W” questions. Why did the claim arise? Why did that problem occur in the first place? What has happened since? What else could be affected? And what can we do to ensure it doesn’t happen again?"
James Graham, director of professional indemnity, Travelers

 

36. If I notify a potential claim, will my insurer increase the premium at next renewal?

The mere notification of a ‘circumstance’ (potential claim) or claim is, in itself, unlikely to have any impact at renewal. The issue is the nature of the claim. Is there a likelihood of a large claim payment? Only once reserves for a potential claim payment are being set by the insurer, or the claim has actually been paid, will a claim usually affect the premium at your next renewal.

Explain the circumstances of the notification; in particular, why it was a one-off occurrence (if that is the case). Give details of what the firm has done to mitigate re-occurrence (see 35).

Failing to declare potential claims can lead to the insurer either voiding the policy or reducing potential claim payments. Every law firm has a duty to be open and honest with their insurer and to make the insurer aware of any ‘material circumstances’ relevant to the insurance cover (Insurance Act 2015). If you are ever unsure about this issue, speak with your broker.

Brian Boehmer, partner, Lockton

37. How far back do I need to report claims history as part of my presentation of risk?

Insurers will require at least six years of historic claims reports. Some insurers may request up to ten years, or more than ten year, depending on the underwriting model being used.

A claim will usually remain on a firm’s record with that insurer, but a claim will stop being used in the insurer’s premium calculations (see 34) after a certain period (eg six or 10 years).

However, you have a legal duty of 'fair presentation of risk'. So you must disclose all material information that is known to you or which ought to be known to you. Information is material if it would influence the judgment of a prudent insurer when deciding whether to insure you and on what terms. As a result, you should disclose information about any large losses incurred even if they happened more than six years previously.

Brian Boehmer, partner, Lockton

38. Why do I need to provide a narrative about a past claim if that fee-earner has left so it won’t happen again?

Done well, this explanation will give the insurer confidence that the law firm has made changes to stop a similar occurrence happening again – regardless of which fee-earner will be doing the work.

Such changes could include greater due diligence when hiring fee-earners, or increased checking of work, or new systems being put in place to stop deadlines being missed.

Gary Horswell, managing director, Ntegrity

39. Why am I being asked for information including claims for a business I acquired nearly five years previously?

Depending on the nature of the acquisition, your firm may or may not be the ‘successor practice’. If you are the successor and no run-off policy has been purchased, your firm will be responsible for insuring the acquired team’s/firm’s run-off (previous work) for the previous six years. (See 14)

Professional indemnity insurance is on a claims made basis. So your current policy will pay out for any valid claim made during the policy period, regardless of when the incident leading to the claim actually occurred.

Every law firm has a duty to be open and honest with their insurer and to make the insurer aware of any ‘material circumstances’ relevant to the insurance cover. Not doing so can lead to the insurer either voiding the policy or reducing potential claim payments.

Brian Boehmer, partner, Lockton

40. Do I need to tell insurers that I am hiring a new fee-earner?

If you are hiring a fee-earner simply to replace someone who has left and they will be undertaking the same role, this will probably not be of interest to your insurer, although you will of course need to update your personnel details in your next renewal presentation. However, if the new hire means that you will be branching out into an area of law your firm has not undertaken before, this is something that should be notified to insurers – as it presents a material change of risk and under the Insurance Act 2015 you have an ongoing duty to make a fair presentation of your risk. Also, some insurers may insist on charging an additional premium for the remainder of the policy period to reflect this.

You should also notify insurers if you are making any hires at a senior level (partner/member/director) or any significant hires, such as a rainmaker partner and their team, particularly if this is likely to result in a significant increase to your firm’s projected gross fee income.

Neil Pointon, divisional director, Howden

41. If I have a data breach, should I report it to my PI insurer?

Yes, you should report any data breach to your PI insurer as soon as possible (as well as your cyber insurer if you have cyber insurance). You also need to consider your regulatory obligations regarding notifying the SRA and the ICO.

Your PI insurer will likely inform you that they are “reserving their rights” while considering the matter and will confirm their position on coverage in due course. This is because, while a solicitors’ PII policy will provide cover for civil liability which arises out of private legal practice as a result of a cyber event, only third party loss is covered – so it will not cover any costs and expenses of dealing with a cyber event such as a data breach, which can be very significant. This is why all law firms should consider taking out a cyber insurance policy in addition to their PII cover.

Neil Pointon, divisional director, Howden

42. What is a ‘circumstance’ and why do I need to notify it?

A circumstance is a matter or a complaint that could give rise to a claim against your professional indemnity policy. For example, if you discover a mistake or oversight that has the potential to cause a client financial loss.

Whether this has been identified by a claimant or the fee-earner, it is notifiable upon the date of discovery. While it may be hard to determine whether it will evolve into a claim, you are obligated to notify the insurer in any event.

Check with your broker on any matters you feel are borderline. They will usually tell you to notify to be safe. There should be no impact on your insurance, unless the amount per year is excessive.

If you do not notify from the outset, it can lead to problems. If could prejudice the insurer’s position, through not being able to deal with the matter early enough (eg an early settlement to keep costs down), or not questioning which year of insurance the claim should fall in. This becomes more of an issue if you have changed insurers, or if you have a different excess structure.

Brian Boehmer, partner, Lockton

43. When should I notify a potential claim?

Insurers should be informed when you first become aware of any complaint or allegation against you, or as soon as you identify any oversight or omission that might result in a financial loss for your client.

Any such issue should be investigated immediately, to establish whether it is a service issue (where the client may only want to be listened to and/or to receive an apology) or a more serious issue that may lead to a claim.

If you are ever unsure whether a potential claim warrants formal notification, call your insurance broker to discuss it with them. Even if remedial action can be taken to prevent a loss from materialising, seek guidance.

Dan Blundell, senior vice president, Paragon

44. Do I need to notify complaints?

Whether or not a complaint should be notified to your insurer depends on the nature of the complaint. A mere service complaint, such as a client complaining that a fee-earner has not been returning calls or keeping them updated, does not need notifying to your insurer and you should deal with the matter according to your firm’s complaints handling procedure. However, a client might be claiming a delay on your part has caused them financial loss. Where any loss is alleged, the matter should be notified. Between these two extremes there is a 'grey area'. If you find yourself in this grey area, your broker can advise you whether the matter needs notifying or not.

Notifying your insurer of a potential claim helps them to see that your claims reporting process is effective. But showing your complaints log to your insurer annually (with an explanation of the remedial actions taken) may be more appropriate in some cases.

Neil Pointon, divisional director, Howden

45. Can I arrange a face-to-face meeting with you as a broker to allow our wider team to discuss renewal?

Yes, if your broker does not offer this you should consider whether you are receiving the right level of support, although a meeting may not be appropriate for every firm.

The more people your broker meets and knows at your firm, the better the understanding of your business. This in turn makes it easier to present your firm well to the insurance market and get the best deal possible.

We are now seeing a return to face-to-face appointments, which can give your firm a better opportunity to present its case.

Dan Blundell, senior vice president, Paragon

46. Are face-to-face meetings with insurers possible via Zoom or Teams, to explain more about our firm to them?

The short answer is yes; your broker should be able to organise a remote meeting with the underwriter and this is expected to become the norm moving forward. The earlier it is scheduled, the less danger there is of the underwriter’s diary already being fully booked.

It is always advisable for a law firm to offer to meet the underwriter. Your broker can offer this in turn to the underwriter, to deal with any queries quickly and efficiently.

Gary Horswell, managing director, Ntegrity

47. My PI insurance is arranged with several insurers in layers – how do you ensure that any claim is handled satisfactorily?

In a layered insurance arrangement, your primary layer PII insurer covers claims up to its limit of indemnity. Above this (the ‘excess layers’), additional layers of cover are provided by other insurers, each responsible for a portion of the excess layer cover. Importantly, the terms and conditions of the primary layer policy typically govern how the entire structure responds to a claim. The primary layer insurer will normally have control of the claim, although if the value of the claim is sufficient to reach excess layers, a panel law firm will usually be appointed to represent your firm on a joint basis with the insurers.

Having a broker with a dedicated claims team experienced in solicitors’ PII claims is a vital part of this. This team plays a central role in coordinating the whole process. They act as a conduit between your firm and the insurers, ensuring clear communication, timely updates and strategic guidance throughout the life cycle of the claim.

Neil Pointon, divisional director, Howden

48. Will I prejudice my firm if we go into the Extended Policy Period (EPP) briefly?

Going into the Extended Policy Period (see 29) may well prejudice your firm and should be avoided. Some insurers will not even quote a practice that has fallen into the EPP.

A typical scenario is that a broker promises terms that cannot be delivered, so at the eleventh hour the law firm is then presented with significantly worse terms – with no time to seek alternatives.

So start your renewal process early. Engage with other brokers and tell them the renewal terms you have been promised. Then get the terms in writing, so the offer of insurance cover is certain.

Dan Blundell, senior vice president, Paragon

49. What are the benefits of a broker having ‘direct insurer access’?

As the name suggests, direct insurer access simply means that your broker deals directly with the underwriters at the insurance companies, rather than dealing with an intermediary broker who then deals with the underwriters.

The benefits of direct insurer access are substantial:

1. It saves cost, as there are ‘fewer mouths to feed’.
2. It saves time, as there are fewer links in the chain.
3. It saves misunderstandings, as it reduces the need to repeat information.
4. It makes it easier to deal with any claims or other issues arising in the year.

The whole insurance process is generally more complex and takes longer than it has done previously (see 27). Using a broker that lacks direct access adds to the complexity and the timescales.

Brian Boehmer, partner, Lockton

50. When might we be asked to provide personal guarantees?

Personal guarantees are not a common feature of PI insurance in the legal sector; but in certain circumstances, in order to make the PI insurance commercially viable, insurers may insist on them.

Why is this necessary?

In the event of a successful claim, the insurer has to reimburse the claimant in full whether or not the insured firm is able to pay the insurer any excess contribution as agreed in the insurance policy. Similarly, in the event of a firm closing and run-off being activated, the insurer has to provide the six years’ coverage whether or not the firm is able to make a contribution to the run-off premium.

By obtaining personal guarantees from the equity partners / directors / members of a practice, the insurers are given the necessary comfort that they will receive any excess contribution that is due from the firm, and any run-off premium should the practice fail.

There are now some insurance products available to insure at least part of the exposure to a personal guarantee.

Brian Boehmer, partner, Lockton

 

Why do law firms choose Travelers?

It’s because Travelers has unmatched expertise and longevity in the legal sector, with a dedicated team of experts in underwriting, claims and risk management.
 

See also:

PI insurance for law firms: Part two

• PI insurance policies and cover
• Closing down a legal practice
• Other special situations
• Handling PI insurance claims
• Jargon buster, professional indemnity insurance