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Claims: why manage the risk?

Michelle Garlick discusses how firms can improve their claims record and reduce their PII premiums

2 June 2014

Claims experience is probably the most significant factor influencing an insurer’s decision to insure a risk. Insurers want a return on their investment and will view a firm/lawyer with a significant history of claims as a poor risk.

A firm with a good claims record, on the other hand, can and should expect this to be reflected in the cost of its premium, but this is not a panacea. Insurers look at a firm’s risk profile holistically and there are other rating factors that are taken into account (for example, fee income, work type, claims paid and reserved over a ten-year period, number of partners) that can have a very significant impact.

Premiums can vary from under one per cent of turnover, for a more profitable firm undertaking low-risk work with no claims on its record, to ten per cent or more for a firm with high risk work and a very poor claims record.

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