PII focus | Top 200: treat renewal like a tender

My firm operates across a wide range of industry sectors with 40 partners, 200 staff and a turnover of about £24m. We have a strong real estate practice base covering both publicly accountable and private sector markets. A significant part of our business falls within the high-risk category for PI insurance purposes.

As a result, risk management and quality standards have been important for us for many years. While we have traded on a very good claims record, to appease our insurers, we decided to seek Lexcel accreditation about three years ago, which took a few months to implement. This has been worthwhile and has helped us to improve consistency in professional standards throughout the firm.

The introduction of outcomes-focused regulation (OFR) has raised awareness across the profession about risk management. Hopefully, this will result in a reduction in the number and value of claims against law firms over time. The downturn in the economy has resulted in recession-led claims against professionals, including lawyers, and is likely to continue while these conditions prevail.

Capping liability

The legal profession does not appear to be as effective as other professions at capping liability on non contentious work undertaken. The accounting profession by comparison seems to go to the other extreme. Perhaps the Law Society should take this up, with a view to establishing a formula for liability capping for legal services that would be fair and reasonable. This is particularly relevant with margins becoming tighter and where we have to provide more for less.

The assigned risks pool (ARP) has affected the profession as a whole, because part of the cost of running it has in effect been charged back to all firms through increases in premium costs. Its intended closure by October 2013 should help ultimately with the maintenance of market-based PI insurance. This should ensure that premium costs remain competitive.

As regards the insurance renewal for 2012/13, our brokers tell us that the market remains fairly competitive and that rates ought to be in line with last year. Our challenge is to get past the headline profiling of firms by the insurers, who give priority to firms who operate mainly in low risk sectors and then look behind the veil at claims record, etc. We want them to look behind the veil first, which becomes something of a test for our brokers.

We treat the PI insurance renewal almost as if it were a tender. It is important to give as meaningful a description of one’s business as possible, when seeking to persuade an insurer to take on a significant part of your business risk. Much of our work is in specific market sectors, where we consider ourselves to be well versed. We believe that sector knowledge is an important ingredient in the provision of legal services and is also a factor in maintaining a good PI claims record.

We have instructed the same broking team for a number of years. Their knowledge and expertise, both of the insurance market and us, has enabled us to secure early renewals, two-year deals when appropriate, all at competitive rates.

We tend to stay with the same lead insurer from one year to the next unless there is a marked difference in price between them and a reputable competitor. Each side invests time in getting to know the other. It is worth making the effort if a continuing business relationship is envisaged, which invariably leads to better understanding and much better support, should the situation arise.