Insurance: Small firms seeing big premium rises
Smaller law firms have survived the pandemic well but are very worried about possible increases in the cost of their professional indemnity insurance (PII), a report has found.
Overall, it painted a very positive picture of smaller firms, with 93% confident in the future – a higher proportion than before the virus.
The LexisNexis 2021 Bellwether report Small law in the pandemic: The good, the bad and the new found that after PII, cited by 23%, the most commonly mentioned “very significant threat” was from the continuing demands of compliance (22%) and the need to attract and retain good lawyers (21%).
“Most firms saw a rise in PII, attributing this to increased risk during the pandemic and market hardening owing to insurers leaving the market in recent years.
“While PII costs typically rise every year, small and SME firms saw an average increase of around 30%.”
Researchers based their report on in-depth interviews with lawyers in small or SME firms as well as an online poll of 305 solicitors carried out in May and June this year.
The vast majority of lawyers (93%) were confident in the future of their firms, compared to 78% last year. Exactly two-thirds said business was growing and 31% that they had outperformed expectations on profit.
At the same time, 39% of the firms polled had taken out government-backed pandemic loans, and 59% used the furlough scheme – almost two-thirds of those did not intend to refund the money to the government.
Just 2% of firms said they would be paying back furlough money, while 35% had not decided.
Although one in 10 said they were working from home all week, 42% said they were expected to work in the office five days a week, with 11% working four days and 19% three.
Perhaps for this reason, a large majority of law firms said they had no intention of changing their office space (71%) and only 14% admitted to cutting it back.
Seven out of 10 lawyers said their firms had done well in terms of their wellbeing, with the same proportion saying that, despite this, their stress levels were high.
Some 38% of lawyers said they would not go into law if they were starting over in their careers.
The report said: “The strange mix of high job satisfaction, worrying stress levels and career regret paints a complicated picture.
“Lawyers may feel their jobs are fulfilling but spending more time at home has perhaps pushed some to revaluate if the pressures of the job are worth it.
“With SME firms listing their biggest challenge as attracting and retaining good lawyers, firms need to check in with their people to make sure they’re happy at work.
“This risk of losing staff is compounded by the ease of remote onboarding during a hiring boom.”
The report found that, unlike larger law firms, smaller ones did not have mergers on their mind, with more than 66% saying they wanted to grow organically and 62% that the pandemic had not changed their views.
Chris O’Connor, director of solutions at LexisNexis, commented: “It has been a tough slog for law firms through the pandemic, with many depending on government grants and furlough to survive. So, it is excellent to see the strong growth trajectory in the market.
“But, with stress and wellbeing continuing to be a challenge – it is clearly crucial for firms to identify the root cause and seek to invest in solutions that will help to mitigate it.”
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