Bracing for a hike in Professional Indemnity Insurance
The Law Society Gazette recently published an article that warned firms to brace themselves for an October PII hike which can be read here;
PII is a recurring problem for many firms, where premiums only ever go up.
So what can firms do to bring them down?
Unfortunately there isn’t a quick fix. Insurers use statistics to determine their premiums, and those statistics are influenced by the whole market and by individual firms.
When it comes to the whole market there’s not much that can be done about other firm’s claims history, but when it comes to an individual firm, then that is within their control to a certain extent.
And “control” is the relevant word. Insurers want to see risks controlled and managed by firms to give them confidence that the level of risk being insured is appropriate.
So how do firms do that?
Firstly a firm should consider its policies and procedures for the control of risk, and whether something can be “mistake proofed” to avoid a risk occurring. Examples for this could be systems in place so that a family fee earner cannot open a matter file for anything other than family work to avoid “dabbling” in areas of law they are not qualified to advise on. Another could be a system where it is impossible to send client care letters out to a client unless a risk assessment and conflict check have been done. A lot of the time this can be done by case management systems, but it’s also possible to do it manually by training personnel to spot these issues and report them.
There are also “risk indicators” that can help stop issues at an early stage. The problem is they are usually unpopular things that aren’t always considered to have any intrinsic value, such as the ever contentious “file reviews.”
While file review corrective actions are the first warning indicator that service or competence may be an issue, there are other equally important indicators, such as complaints, client surveys and indemnity notifications. Our experience shows that where there are multiple corrective actions for a given fee earner at file review, then there are likely to be multiple complaints, and multiple complaints leads to indemnity notifications and back into the vicious cycle of increased PII.
We also mentioned Client Surveys. While not as obvious when it comes to expressions of dissatisfaction, they can be useful indicators as well, as some clients may not complain but express issues with their service via this means.
To read our recent article on Client Surveys, click here;
In some cases quality standards can help demonstrate effective risk management. The Law Society Practice Quality Mark, Lexcel has multiple criteria for systems that prevent and monitor risk and so does the Law Society Conveyancing Quality Scheme. Each of these have requirements for annual risk reviews, and if conducted properly such reviews can prove invaluable in reducing the firms’ risk exposure, and helping it provide evidence that it is not the high risk proposition that insurers would penalise with higher premiums.
If your firm is looking for support in terms of its risk management, we can help with the following services;
- Compliance Planning
- Outsourced File Review
- Outsourced Complaints Handling
- Annual Risk Review Analysis and report compilation
- Client Survey Analysis and report compilation
And many others…
Just contact one of our cpm21 consultants for more information or a no-obligation quotation.