- Professional Indemnity Insurance
Renewing Professional Indemnity (PI) insurance as early as possible is an easy task for a busy law firm to delay. But in the hardening insurance market we’re experiencing now, insurers have their choice of firms to cover. Brokers who wait until later in the year to help their clients renew their PI – or don’t provide sufficient information in their proposals now – may find a sharp decrease in options available to them.
“Underwriters need more information on risks than they have ever needed in past,” said Donna Hurst, Senior Development Underwriter at Travelers Europe. “In a soft market, it was not always necessary for underwriters to receive any more than a fully completed proposal form for the majority of risks. Now, we need to see accounts for the last couple of years at least, an up-to-date profit and loss account, and answers to supplementary questions around the pandemic and how the firm has coped operationally and financially, as well as cyber risk and conveyancing information. If brokers leave this too late, they will find there are fewer markets to give quotes to them or fewer underwriters with time to respond to their enquiries.”
Conversely, brokers who act early on renewals not only improve their chances of securing the best cover for clients, but they also lay the foundation for a stronger long-term partnership with their insurer. That can provide significant benefits as their clients’ businesses change and grow. To present clients in the best possible light with insurers, brokers should help them meet the following criteria when preparing to submit a renewal proposal:
- Start early: Submitting a proposal late in the year allows less time for negotiation with the underwriter and presents the insured as a less attractive risk. “While submitting a proposal doesn’t guarantee a lower premium”, Hurst said, “it will help a firm find more markets willing to quote.”
- Take pride in the proposal: Ensure it is complete, clear and easy to scan so an underwriter can quickly see responses. James Graham, Deputy Head of Professional Indemnity and Cyber at Travelers Europe, advises firms to also submit a separate document that outlines key elements of their approach to risk management. “They should explain what procedures are in place to mitigate risk, and if they have had claims, identify their lessons learnt and what has been implemented to prevent a reoccurrence in the future,” Graham said.
- Go beyond “yes” and “no”: Provide more than the minimum answer required, particularly when it comes to explaining the firm’s management of risk. For example, a firm that operated smoothly during lockdown could point to its longstanding flexible work policy and ability to have staff log in to work from home well before the pandemic. Those moving to remote working should explain how hybrid work looks at their firm, as well as how supervision and systems will change to accommodate it. “Underwriters like things to be ‘business as usual,’” Graham said, “so we need to understand the risks of any cultural change within the firm.”
- Demonstrate conscientious risk awareness: The root cause of a claim may lurk well below its surface. Graham advises insureds get to the heart of a claim by asking themselves five “W” questions. For starters, why did the claim arise? Why did that problem occur in the first place? What has happened since? What else could be affected? What can we do to ensure it doesn’t happen again? “It ensures the firm delves deeply enough into why a problem happened, identifies the underlying issues and finds ways to resolve them,” he said.
- Think about the long term: Involving an insurer early in the planning stages of changes within a firm can lead to not only more suitable insurance protection, but also to a lasting partnership. Even if the proposal form does not ask about the firm’s future plans, it’s in the insured’s best interest to share them with an insurer.
Future plans with insurance implications could include closing a conveyancing department, doing due diligence or securing run-off cover in preparation for a merger or acquisition, or expanding into a new practice area. Involving the insurer early can minimise risk and build trust.
“Firms may believe their plans have nothing to do with insurance, but if we find out about the changes too late, we have no time to advise them,” Hurst said. “When we’re aware of what they’re planning, we can help them to manage the risks around it. It leads to a better relationship.”