Professional Indemnity Insurance (PII) provides financial protection against claims made by clients or third parties for losses incurred as a result of professional negligence, errors, or omissions in the provision of services.
For law firms, securing the right Professional Indemnity Insurance (PII) is essential, and the recurring PII renewal process in particular is a critical task on any law firm’s annual to-do list that should be managed with the utmost care and attention.
Unfortunately, the PII renewal process often presents a number of challenges for law firms that can make securing the appropriate cover before the renewal deadline seem unnecessarily challenging. On top of this, the PII market has been tightening over recent years, with premiums noticeably higher year on year, following a period of relatively lower PII costs.
Today, PII renewal presents a significant hurdle each year for law firms up and down the UK. In fact, a report in 2023 showed that 37 law firms had been forced to close in the past 12 months due to a lack of PII cover. Based on evidence seen by Gillian Anderson of PI Insurance specialists, Quality PI, in some circumstances, with the right presentation/representation to insurers, this could possibly have been avoided.
Because of this, it’s perhaps now more important than ever to make sure that your law firm takes the right steps to ensure smooth sailing through the PII renewal process.
PII renewal doesn’t have to be a big, complicated and stressful ordeal. With the right preparation, and the right financing in place, law firms can secure PII cover and mitigate against any immediate cash flow impact from the premium.
Let’s explore this further with three key tips to get your law firm on the right track for PII renewal.
1. The earlier you start the finance application process, the better!
A tactic that has long been used by PI insurance providers is to delay the release of premium details until as late as possible.
This delay tactic, intended to retain clients with their current PI insurer, often leaves law firms rushing to secure adequate funding at the eleventh hour.
The increased urgency of these last minute finance requests also increases the risk of funders declining the application... It’s easy to see how something as simple and commonplace as PII cover can quickly become a critical problem for law firms.
So, the solution here is to get ahead of the game. Rather than waiting until the last moment, initiate the financing process early.
Gillian Anderson of QPI suggests that, with the help of an experienced specialist PI broker that has their finger on the pulse as to what the insurance market current trends are, you should be in a position to take a more informed view of where your insurance premium is likely to land.
Gillian adds
"The more time that you give your finance broker, the higher the likelihood that they will be able to raise the right finance for your law firm. After review of your financial information a finance broker will know which markets to approach, thereby avoiding creating issues caused by approaching numerous finance providers."
The more time that you give your finance broker, the higher the likelihood that they will be able to raise the right finance for your law firm.
By securing funding earlier in the process, the firm will also have more time to react if unforeseen circumstances present themselves. We’ve written another article that highlights the benefits of securing funding for PII early, which you may also find useful!
Offers made by funders are often time limited and the rate can be subject to change, but if all the leg work is done in advance, last minute updates and “tweaks” will be a mere formality rather than a major concern.
The key is to submit funding applications concurrently with the PI insurance submission, effectively synchronising the two processes.
2. Getting around the insurance provider’s delay tactic
As we’ve covered, often a law firm’s existing PII provider will not release the specific details of the premium until renewal is imminent. This results in many law firms postponing the PII finance application process until the absolute last minute, which has all of the potential negative consequences that we discussed earlier.
The solution here is to arrange a pre-set funding line.
This means that you work out how much you think your PII premium might cost and then use this as an initial guideline to start the finance application process. This can always be adjusted once the exact premium is known, but it allows you to get the process underway in ample time.
A simple and effective way to calculate what figure to use is to take the premium from the previous year, and add a buffer of 10%. This is unlikely to be exactly what your PII premium will amount to, but in our experience it’s a safe place to start your finance application from.
3. Involve a finance broker ASAP
Law firms should also look to get a finance broker involved as soon as possible. They will be able to advise you through every step of the application process and answer any questions that you may have.
For law firms looking to raising funding for their PII premium, you’ll need to provide the follow information to your finance broker:
The latest finalised accounts
Up-to-date management accounts
3-6 months of bank statements
At Gemstone Legal, we are an independent finance broker exclusively specialising in the legal market. We have extensive experience helping legal practices across the UK to source bespoke funding solutions to meet a variety of requirements, including PII funding.
After taking the time to understand your specific situation regarding your PII renewal, we will present you with a range of solutions, tailored to your requirements. We’ll guide you through the entire application process and help to present your law firm in the best possible light to potential funders.
Get in touch with us today to discuss your law firm and begin the PII funding application process.
Professional Indemnity Insurance Renewal Funding Conclusion:
Despite what you may have experienced or heard about in the past, Professional Indemnity Insurance renewal doesn't have to be a source of stress and uncertainty for law firms. By submitting funding applications concurrently with insurance submissions and adopting a proactive approach to financing, firms can streamline the renewal process to achieve the best possible results.
This article was a collaboration between Gemstone Legal and PI insurance specialists, Quality PI.