PII: More longer-term policies
The current “favourable” professional indemnity insurance market is expected to continue throughout the rest of 2024, according to a leading broker.
It advised law firms to “focus their risk management spotlight” on wills and probate, where notifications of claims are increasing.
Howden said that the hard market of earlier years is “definitely behind us”, which had meant “plenty of good news” for law firms renewing cover on 1 April 2024.
Along with increased capacity, three new insurers had come into the market and none had left.
The combination of increased capacity and appetite by insurers “had a knock-on effect”, with insurers competing to attract firms they considered to be a good risk. This resulted in a rate reduction “for many firms”.
The report went on: “We expect the current favourable position with regard to capacity, appetite and premiums to continue throughout the rest of 2024.
“Our conversations with underwriters regarding the 1 October 2024 renewal confirm that they are keen to retain and attract those firms they consider to be ‘good’ risks.
“This means that many are prepared to continue relaxing some of the underwriting rules, such as caps on the percentage of conveyancing work.”
The proportion of law firms reducing their excesses doubled in April this year from 2% to 4%, which was “another indicator of improvements in the market”.
Longer-term policies, which “all but disappeared” during the previous hard market, “started to make a comeback” last year and shot up from 3% of Howden clients in April 2023 and 8% in October 2023, to 26% this April. The most common longer period was 18 months.
However, securing finance to fund premiums was “one area where things were not quite as easy”, with providers increasing their scrutiny following the October 2023 renewal.
“This continued for firms renewing in April 2024 and is a reflection of concerns regarding the financial stability of law firms in the current economic environment.
“We recommend that firms start the funding process early, particularly where your financial position is challenged or has deteriorated since your last renewal.”
Analysis of its book of SRA-regulated law firms showed “no significant uplift or development in recent claims activity to cause concern”.
The proportion of claim notifications relating to residential conveyancing fell steadily from 32% in 2021 to 26% this year, but wills and probate notifications have gone the other way, from 15% to 20% over the same period.
“This is an area where firms should look to focus their risk management spotlight – and tell underwriters they have done so.”
However, when it came to money paid out by insurers for different kinds of legal work over the period 2018-2024, residential conveyancing remained “the front runner” (19%), followed by commercial conveyancing (17%). Despite the increase in notifications, wills and probate work only made up only 6% of claims paid by insurers.
Meanwhile, the Council for Licensed Conveyancers (CLC) has reported a successful annual renewal round – 1 June was the deadline, with firms given an extra month if needed.
It said all of its regulated firms, across both conveyancing and probate, secured cover, with two new entrants to the market – Probitas Syndicate 1492 and XS Assure Limited – joining Chubb, IGI, Amtrust and Liberty Mutual.
Research released last month by law firm Browne Jacobson and the International Underwriting Association said licensed conveyancers paid a median premium of around 3% of turnover, compared to 5% for solicitors.
Claire Richardson, deputy director of authorisations at the CLC, said: “We have seen firms offered better terms and more competitive pricing because of the increased options. As a result, firms are choosing their insurer based on service rather than solely on the premium offered.
“Further, the growth in insurers’ appetite to enter the CLC market is an indication of the overall positive performance of CLC practices.”
The Browne Jacobson report also highlighted concerns that recent case law on aggregation could put premiums up.
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