Why our law firm's PII premiums go down, not up, each year

The spectre of professional indemnity insurance (PII) rises to haunt the UK legal profession each year, usually in September, despite the ending of the single annual renewal date. It's not surprising, given the continuing uncertainty around PII markets and the fact that PII premiums are generally a firm's biggest overhead.

At the risk of sounding complacent, our firm is considerably less daunted by the impending renewal season these days because we have managed down our premiums through improved risk management and fewer claims. As a result, we expect another price reduction in the season ahead.

We believe our attitude and practical approach to risk management are key to achieving lower premiums. Of course we make occasional mistakes and get complaints - the point is that we use these mistakes and complaints to learn and improve the way we work.

We're buying our insurance as part of LawNet's group buying scheme, which places £1.25bn worth of cover for network members. Because all members have to hold ISO quality accreditation, insurers offer better PII rates. But each firm's premium reflects its own work types, risk management and claims record, after which a group discount is applied.

After having one or two significant claims, and with our premiums rising, we saw the need four years ago to put a greater emphasis on risk management and to implement a more rigorous regime, drawing upon external expertise through the network.

Rigorous risk regime

We quickly realised the benefit of a focused system with regular assessment of breaches to help avoid claims. This, in turn, helped us to build a trusted relationship with insurers and, as a result, we saw a pattern of PII premium rises reversed at a time when other firms were still seeing increases.

Fee earning and client service have always been top priorities, but today risk management is considered equally critical to our success. We are a diverse firm in a number of ways. We have three offices and plan for more. We do a range of work types, including the insurers' hotspots of residential conveyancing and private client work. We have a broad client following, including a strong privately-funded criminal practice.

A tight risk management attitude is key to avoiding falling foul of the regulator and the criminal fraternity. It is also critical to ensuring a quality service experience for our clients, across all offices and disciplines.

At the heart of our approach is a comprehensive and regularly-updated office manual, which is readily accessible on the firm's intranet, well indexed and contains all the details and pro-formas needed to comply with our agreed working practices.

Overseeing this key document is our firm's Risk Advisory Group (RAG), which I chair as CEO, while wearing my other hats of compliance officer for finance and administration (COFA) and money laundering reporting officer (MLRO). Alongside me is our compliance officer for legal practice (COLP) and the complaints partner - who also manages the firm's relationship with PI insurers. This group is clerked by our risk and compliance manager, a part-time role.

For our COLP, partner Hugh Rowland, the importance of our RAG can't be overemphasised. Every two months, all non-compliances are reviewed and the learning points are drawn out. The firm's risk register is also reviewed to ensure it keeps up to date with any changes in our environment, including anything emanating from the Solicitors Regulation Authority (SRA) or other regulators.

The standing agenda also covers all other aspects of risk management, including complaints and PII notifications/claims, breaches of SRA accounts rules, COLP issues and money laundering queries from staff. After each meeting, the minutes and updated risk register are circulated throughout the partnership and team leaders are encouraged to include updates within their team meetings.

Whenever we welcome a new member to the firm, we emphasise the need for vigilance and compliance. I meet with all new entrants, from office juniors to laterally-hired partners. My role in the induction process includes a rigorous explanation of our compliance system and the need to report any concern - no matter how slight - to the correct channel.

Most importantly, I make new starters aware that failing to report is seen as a greater sin than the original incident, and that it is important for the firm to maintain our ISO 9001 accreditation in the interest of commercial success.

Ongoing support for the mindset comes from a programme of random file audits, a process overseen by the senior partner, combined with our half-yearly external ISO audit.

Risk-aware culture

We have reached the stage where considering the implications for risk and compliance has become 'just how we do things' in the minds of fee earners and support staff. We're working on the in-house development of a centralised database and screen-based suite of report forms, which will make it even easier to report any concerns or breaches.

It's too easy to become complacent when there's a paper system in place - what's important is ensuring that people comply instinctively, by making it easy for everyone in the business to do just that.

Alistair Lang is CEO of LawNet member firm Gotelee (www.gotelee.co.uk)