Welcome to our H1 2024 market update for professional indemnity insurance within the legal sector for England and Wales. Take a moment to read more about our experiences with rates and how the first half of this year compares to 2023, plus hear more on our recommendations to those looking to capitalise on reductions.
Key observations
Rate Reductions
In April 2024, we were delighted to have achieved rate reductions of between 7.5-15% for some of our clients and in some cases, higher for new clients. Our rate reductions are a result of leveraging maximum competitive tension amongst qualifying insurers.
7.5-15%The range of reductions in rates experienced for our clients. Some of our new clients saw higher reductions
We are of course cognisant that some firms will benefit more by these market trends than others, but it is our role as the broker to assimilate the current market forces and articulate how our clients are managing their risk and in turn are deserving of premium relief.
How does this period compare to our previous update?
In our November 2023 market update article we described the differences between hard and soft market conditions and how we were transitioning from the former to the latter after several years of premium increases. We also explained how a law firm's fee income is an arbitrary figure, intrinsically linked to the premium insurers charge for Professional Indemnity Insurance (PII) as a measure of risk exposure. Having now concluded our April 2024 renewals we are incredibly pleased to note that the market conditions for law firms PII are the most benign seen since 2018.
Communication is key for achieving optimal renewal outcomes in this competitive market
Arranging pre-renewal meetings for our clients with their incumbent primary layer insurers provides underwriters with a better understanding of the client's business and brings their proposal form to life. Our methodology demonstrates clients that benefitted the most in rate reductions were those that met with their incumbent and alternative insurers. We believe that regular communication is essential in order to maximise any potential premium savings. Providing underwriters with a renewal submission which proactively addresses topical issues can display an excellent understanding of a law firm's approach to a risk averse attitude.
Key discussion points to share with your brokers and market
Based upon our recent experience, our 'top tips' for law firms wanting to prepare for their forthcoming renewal would be to focus on the following areas:
Supervision and artificial intelligence (AI)
We have commented in the past that underwriters place a great deal of emphasis on how law firms ensure adequate supervision within the hybrid workplace, more recently we have started to augment our approach by elaborating on the supervision commentary to include how law firms are adopting AI in their day-to-day fee earning work. Underwriters understand that AI is very much here to stay, however, they are keen to understand whether law firms are taking the appropriate measures to protect client data and prevent potential professional negligence claims arising from instances where AI could 'hallucinate' and get things wrong. Some underwriters have started to ask whether law firms have a dedicated AI policy in place and whether further supervision is in place for any generative AI outputs and how that is being managed.
...more recently we have started to augment our approach by elaborating on the supervision commentary to include how law firms are adopting AI in their day-to-day fee earning work.
Workplace culture
We believe that regular communication is essential in order to maximise any potential premium savings.
We previously discussed how a law firm's business continuity plan should hold operational resilience at its core. We have seen that emotional resilience is also a pivotal feature in managing risk. The morale, mental health and integrity of all staff and decision makers has a crucial role to play. Firms with a strong risk mitigating culture which champions a positive workplace will help with retaining staff and valuable clients, at the same time attracting new talent and new business. Staff attrition levels continues to be an area of focus for underwriters, with most insurers now asking whether law firms have a dedicated ESG policy in place.
Building Safety Act (BSA)
With those law firms that undertake conveyancing, underwriters are keen to understand what measures have been adopted to; first and foremost, recognise if a transaction is within scope of the BSA and secondly what further controls have been implemented by law firms to minimise the additional risk posed by the BSA.
...underwriters are keen to understand what measures have been adopted to; first and foremost, recognise if a transaction is within scope of the BSA
We have experienced a varying degree of risk mitigation measures employed by law firms, with some refusing to act altogether on transactions which may be exposed to the BSA and some law firms on the other end of the spectrum deploying a great deal of resource to better understand the implications of how a law firm could be exposed to additional risk.
Consider your risk profile and attitude to risk (BSA)
With the current market conditions, it is imperative that law firms are accurately articulating their risk profile to insurers so that potential rate reductions can be achieved. At WTW, our depth of resources across account management, risk management and claims advocacy mean that we are able to work with our clients and spend the time needed to ensure the underwriters perception of the risk profile of a law firm is accurately represented.
Benchmark your plan via our WTW PI Health Check
If you are not a client of WTW and would like to understand ways in which we assist our clients in optimising their PII solutions, please get in touch for a PII Health Check.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.