The process of professional indemnity insurance (PII) renewal was smooth for most firms—apart from a hike in run-off cover.
Respondents to the Law Society’s 2015-16 PII survey reported the market was competitive and favourable to firms, with premiums 8% lower on average than last year. Nearly two-thirds of firms renewed with their previous insurer. More than one third moved to variable renewal-date policies. However, the cost of run-off cover has significantly increased in the past year.
Law Society president Jonathan Smithers says: “Run-off cover is a necessary protection for clients, employees and for retiring solicitors. The hike in run-off cover and the closure of the Solicitors Indemnity Fund (SIF) in 2020 create challenges for partners in small firms wishing to retire. For the same reasons, closing down a firm will require careful forward planning. The Law Society is considering whether there are any viable options to replace the SIF beyond 2020.”
Larger firms expressed more concern than small firms that the Solicitors Regulation Authority recently consulted on reducing compulsory run-off cover from six years to three.
Smithers also warns firms to tighten protection against scams since some insurers now ask what measures have been taken to guard against this. Nearly one-quarter of firms said they had been targeted by scammers last year. Less than 10% of attempts resulted in theft of client-account money. Insurers paid up in full or in part in about one-third of cases.
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