Why choosing the right professional indemnity insurance (PII) broker can be key to your firm’s future

In August 2020, Wesleyan was introduced to a NewLaw firm that was preparing its SRA application but was having problems obtaining PII quotes.

Law firms renewing their professional indemnity insurance (PII) in England and Wales in 2021 are experiencing arguably the toughest market conditions the profession has seen, since the demise of the Solicitors Indemnity Fund in 2000. Even pre-Covid-19, a hard market had been on the horizon for some time. The practical and economic effects of the pandemic further heightened the situation, leaving most firms facing rising renewal premiums and a distinct lack of viable alternative competition for their business.

In addition, it has also become increasingly difficult for new-start legal practices to obtain that all important insurance quote from a participating insurer to support their Solicitors Regulation Authority (SRA) application. As with existing practices, no two new practices are the same, so it’s important to have a broker that does everything they can to understand the business and the team behind it.

In August 2020, Wesleyan was introduced to a NewLaw firm that was preparing its SRA application but was having problems obtaining PII quotes. It had already approached a well-known solicitors PII broker that had liaised with most of the insurance market available and been unable to obtain a single quote.

The law firm in question was a bold, litigation-focused, new startup that intended to undertake multi-party actions and complex data breach work. It was being set up by a well-known and respected litigation specialist that was going to share their time between the established business, and the new business, which would be run by an experienced team.

As previous attempts to obtain PII were unsuccessful, our first job was to find out which insurers had already seen the risk and identify which markets were left. The list of potential insurers was very small and there were only three insurers that hadn’t already been approached.

With limited options, it was vital that we got to know everything we could about the business before making our presentations to insurers. This involved fully reviewing its business plan, cashflow forecasts and most importantly (in this case) learning all about the team of managers and fee earners within the business. This meant we were able to demonstrate that the new-start firm were a cohesive team with a wealth of litigation experience and excellent track records.

Once all relevant information had been gathered, we began preparing our presentations to insurers In a pre-pandemic world we would have preferred to talk through our presentations face to face with an insurer. Due to Covid-19 restrictions it was more important than ever to make a firm’s insurer presentation standout for the right reasons and that includes demonstrating the broker knows its clients.

A good broker should always know that timing can be crucial. When we had meticulously gathered all the information to prepare our presentation and were about to enter the final week of September, during which time insurers were flat out dealing with PII renewals (due on 1 October 2020). We explained to our client that holding onto our presentation until early October would be the best course of action. This would ensure that two insurers we had identified would have more time to fully review their risk. A third potential insurer was closed to writing new business, which we would approach at a later date.

Our strategy worked and shortly after we presented to insurers in early October 2020, we received our first formal quote back from a long-established A-rated insurer. This allowed our client to finally begin the process of submitting their application to the SRA. Once the client’s application to the SRA was in progress, we approached the third insurer, which was now open to quoting for new business. This final approach was also successful, and we managed to secure the client a 20% reduction on the total cost of insurance.

Please remember, when choosing a PII broker, don’t assume that because they can approach the same insurers, they will do the same job. Make sure your broker cares about getting to know your business and is asking the right questions. If you don’t pick wisely you may not get the results your business needs.