The continuing challenges of professional indemnity insurance renewal

With the approaching traditional renewal date of 1st October, law firms are being urged to initiate the renewal process for the professional indemnity insurance (PII) promptly.

The recent PII renewals have had an adverse effect on smaller firms and sole practitioners in particular due to significantly elevated premiums. A recent report revealed that PII has increased by an average of 30 per cent amongst SME firms over recent years, with two-thirds of respondents saying the cost of PII was one of the biggest threats to their firm.

Several factors have contributed to the challenges faced by solicitors during PII renewals in recent years. These factors include harder Insurance market conditions, economic uncertainty and the stringent SRA minimum terms and conditions (MTC) for insurance coverage imposed on the Underwriters. These terms and conditions offer one of the broadest policy covers available to a profession and their clients but comes at a cost to the Insurers with claims and the profession with premiums. Sole Practitioners have always been penalised with the choice of fewer insurers to choose from unlike the bigger sized firms. Whilst there is a new entrant to the PII Insurer market this year, it is currently unclear if their appetite will extend to sole practitioners.

How To Prepare For Your Pii Renewal

To ensure a smooth renewal process, the Law Society advises solicitors to be organized and submit their applications to PII insurers well in advance. Unfortunately, a significant number of solicitors wait until the last couple of weeks leading up to renewal to submit their presentations, whilst others miss the deadline altogether. These delays result in firms being placed in the extended period, which is not only a way to obtain more time, but also a punitive measure that must be reported to the Solicitors Regulation Authority (SRA).

WHAT HAPPENS IF YOU ARE UNABLE TO RENEW YOUR PII INSURANCE?

If solicitors are unable to renew their insurance, they will be compelled to operate within the SRA extended policy period and cessation period.

The extended policy period grants an additional 30 days extension to the existing policy, allowing firms more time to secure insurance. However, if coverage cannot be obtained within this period, the cessation period begins, providing the firm with 60 days to plan a controlled closure, merge with another firm, or be acquired by one, but prohibits them from taking on any new matters.

HOW CAN R&R SOLUTIONS ASSIST?

R&R Solutions offers assistance to firms that wish to exit specific areas of law or are struggling to obtain professional indemnity insurance coverage. Whether firms choose to exit high-risk markets, merge with other firms, or plan an orderly closure, R&R Solutions can facilitate the process. Their team ensures seamless file transfers to approved law firms, safeguarding the integrity of clients' cases. The unique scheme caters to various professionals, including restructuring and insolvency solicitors, insolvency practitioners, and accountants.