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Preparing effectively for PII renewals can save time and cost

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As we enter March, many in the industry will be planning for their professional indemnity insurance (PII) renewals.

Changes implemented by the SRA/Law Society in 2015 enabled law firms to purchase PII at any time of the year, which has simply created another renewal window. Previously, firms had to secure their PII by 1 October each year, but insurers responded by offering 18-month policies, creating a new window on 1 April.

An estimated 30% of the market now renew their policies on the 1 April deadline and the good news is that premiums have stabilised this year, and in some cases reduced, as the impact of Covid abates and its consequences on claims have become more apparent.

It is also rumoured that new insurers are contemplating coming into the market which, along with additional capacity, could put a downward pressure on prices.

However, with general inflationary pressures hitting all businesses, law firms need to ensure they keep a firm grip on costs where they can. There are a few steps law firms can take to make the process of renewal as smooth as possible.

PII renewal best practice

Firstly, planning is key. In order to secure the right quote from an insurer, legal businesses need to ensure that they thoroughly prepare and provide as much information as they can to their chosen broker. This will help ensure that the insurance underwriter has all the information required to evaluate the risks involved. We would advise firms start the process as soon as possible to allow plenty of time for collating the necessary information and so they can be as thorough as possible in their planning.

It’s also important to explain how your business has responded to the pandemic and what measures and processes were implemented to adapt during lockdown. Underwriters will want to understand whether those processes are fit for purpose for long-term homeworking and will want to see include more nuanced elements, such as quality control around complex work.

Finally, it’s important to include your report and accounts in the original submission. Take the time to provide context around this, including explaining any bad debts and highlighting any cash reserves. You will need to show insurers what is being done to ensure the financial stability of the firm, and provide evidence that you are forward-looking.

Industry challenges

In terms of managing the costs of PII, firms can consider financing options, some of which are specifically designed to help law firms meet the cost of PII premiums by spreading payments over the period of cover.

With most firms choosing to pay their premiums monthly, rather than in a single payment, and most insurers earning commission from the vendor finance option they present with the policy, law firms are paying more than they should in finance costs.

Utilising a PI loan facility enables law firms to spread their premium costs whilst paying less interest. By comparison with the PI broker vendor finance options, lenders typically offer firms greater flexibility of payment, allowing them to defer the first repayment by one month and spreading the premium costs over 12 monthly payments.

Law firms should consider all financing options when renewing PII and not just opt for the vendor finance option.


​Nick Sanders, Managing Director, Iceberg