REMEMBER, REMEMBER, 6 NOVEMBER!
Don’t let your November start with an SRA fine.
The SRA has begun issuing fines of around £750 if websites are non-compliant on price transparency. Your website must say VAT at 20%, not plus VAT on your service prices. Including a quote generator for conveyancing alone may not be sufficient.
Websites must be amended before 6 November so act fast!
Professional Indemnity Insurance
1 October is one of the key dates for many law firms as the renewal date of their PII. Over recent years, the law firms and particularly conveyancing firms have been hit by increasing premiums and more onerous terms.
The experience of many firms has been a limited range of options available and very weak bargaining power in what has been described as ‘hard market’ conditions.
Particularly hard hit have been firms who have a heavy conveyancing profile. As market uncertainly and rapid interest rate increases have led to a slowdown in the property market, uncertainty in this sector has not escaped the attention of insurers who have been increasingly wary of taking on risks.
However, it should be noted that, although conveyancing saw the bulk of PII increases, compared with previous years, 2023 saw relatively small, single digit increases in many cases (assuming firms did not already have a poor claims record). Further to this, firms specialising in low-risk work such as employment law saw their rates largely unaffected.
There has been an increased focus on industry specific technology to ensure compliance with professional regulations and management of risk. Colin Taylor (Director at Howden insurance brokers) confirmed in a recent webinar co-hosted with Kate Burt “Making good use of technology can improve the risk profile of a firm… from experience, PII underwriters recognise this.” This observation was accompanied by a warning against the assumption that there would be an automatic discount. It was stressed that technology can play a part in the overall assessment of a firm’s risk when the benefits of the integrated technology are demonstrated as part of a firm’s PII proposal.
PII insurers were quick to react to queries related to Russia following the invasion of Ukraine, with sanctions and related risks likely being a key concern for underwriters for the foreseeable future. Kate Burt, founder of HiveRisk has advised that firms should keep their profile of work and their clients under review.
2022 saw an uptick in claims, partially blamed on the ongoing fallout from the Covid-19 pandemic – also, asset and transaction values have risen considerably resulting in a corresponding rise in the severity of claims. It has been estimated that although two-thirds of firms didn’t raise a PII claim, the cost of claims from the remaining third exceeded the total premiums brought in across the whole legal sector.
Whilst it’s undeniably been a hard time, the majority of firms have weathered the storm and it was an improving picture; in 2023 there have been new entrants into the insurance market offering more products which should have a levelling effect. Further to this, compared with 2022, which saw significant rate increases, 2023 saw the trajectory of such increases somewhat diminished.
What is clear is the SRA’s response following outcries from the profession for support in this area. Paul Philip, CEO of the SRA, was clear at the Compliance Conference on 18 October 2023 that it is not the SRA’s role to step in to correct market conditions, and there were no plans to.
Improved confidence in the market at large (conveyancing notwithstanding) and new entrants has naturally created more competition amongst providers thus tempering premiums to a degree. New found market confidence has also seen some insurers prepared to offer 18 month deals on a selective basis. It should be noted that the PII industry is cyclical and has been in a ‘hard market’ stage these last few years. With rate increases beginning to plateau, it is hoped that we are at the beginning of a softening market.