There are several very positive signs coming from the lawyers’ professional liability insurance (PII) market that suggest a much more stable renewal environment in October for insurance buyers, compared to recent experiences.
Some established insurers started the renewal process early and expressed a desire to grow their respective portfolios.
As a result, they offer simple renewal quotes and extended policy period options.
This demonstrates insurers’ commitment to the industry and their interest in maintaining their current client portfolios, potentially creating some competition that could benefit legal practices.
Insurance buyers are already faced with other options in the market for additional coverage beyond mandatory or compulsory coverage.
This first excess layer above the mandatory limit is also called the working layer. It hasn’t been very attractive to insurers in recent years, but that has changed due to past price corrections.
There are also signs that new, highly rated insurers may soon enter this segment.
Therefore, law firms can generally (subject to claims history) expect more moderate rate increases than the double-digit quotes received in recent years when insurers were eager to deal with rising claims. claims costs.
In the upcoming renewal process, other factors will have more weight, such as:
- fee income levels
- the risk profile of a legal practice
- increase in the value of assets and transactions
Changes with Subscribers
While many established insurers have an appetite for growth, their underwriters should continue to adopt a degree of caution based on their strategic business parameters and risk appetite, reflecting the current economic and political environment.
Ultimately, underwriters must ensure that the business remains profitable by making decisions based on the results of a strict risk assessment.
Practice areas that are potentially more exposed to recession-related claims will once again be in the spotlight.
For example, firms with high real estate exposure will have fewer options available to them and therefore require a more elaborate strategic renewal approach.
Due to the current talent wars, there has been a lot of movement in the lawyers’ PII underwriting community recently.
Many underwriters have turned to competitors, new providers of underwriting capacity and different insurance segments.
Generally, this tends to produce a positive outcome for insurance through increased competition, but given the regulatory framework, internal governance requirements, contractual notice periods and covenants, the legal profession is unlikely to benefit from this movement before 2023 at the earliest.
In the short term, this can create capacity limits for insurers.
Recommendations for practices
Given this, and that approximately 55% of practices will renew their insurance at the same time, I recommend:
- start the renewal preparation process early
- produce a quality presentation that explains how and why your practice is unique
This is essential to ensure the best possible result when renewing.
Due to the limited number of participating insurers active in the market, it is not advisable to spread out the presentation of the renewal.
Practitioners practicing alone up to four-partner firms must:
- ask which insurers their representatives can access directly on their behalf, and
- what appetite do these insurers have for the specific risks to be transferred
There is no benefit in engaging with multiple intermediaries with the same access to the insurer, as duplication of insurers could negatively impact the bottom line.
Similarly, there is no advantage in presenting insurers with risks that are beyond their appetite.
In addition, to streamline the process, it is advisable to:
- remove unnecessary links from the chain, and
- check if your current broker can undertake an extensive direct marketing exercise on your behalf
If not, act quickly and supplement or replace the Services with a reputable alternative.