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Professional Indemnity Insurance (PII) provides an indemnity for legal liability arising from negligent errors or omissions in our professional capacity and related defence costs.

We all know that PII for solicitors is a requirement and that the cover also has to conform to certain standards. All firms must carry a limit of at least £2,000,000 and at least £3,000,000 is required in the case of LLPs.

With cover made compulsory and the amount and nature of it also determined by regulation, is it just a necessary evil, to be negotiated as best one can? Is there any scope to check and improve arrangements?

• Yes and
• yes!

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Beyond the Standard

Also, the requirement to carry a certain minimum limit of insurance cover does not apply "from the ground up". It is possible to exclude the first part of each claim - the excess. In fact, this is almost inevitable, but the way in which excesses are structured can make significant differences to the overall cost of risk finance. Most often, it is the insurer which determines the size of the excess. This really ought to be the insured's choice. Setting the excess at the right level for you, balanced by the thresholds for improvement in rating available from (prospective) insurers can be a very useful tool.

Other such tools include

• Use of aggregate excess, where appropriate, to give protection against the overall effect of excesses in a year
• The way excess layers of insurance cover are structured, to make the best possible use of a limited market
• Use of Alternative Risk Finance, where possible
• Either packaging or unbundling claims handling and other related services, for clarity of cost and value
• Managing the interface between the PII and other business insurances, for optimal results
• Thinking ahead, to build flexibility into the arrangements made, to allow for possible future changes

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There is a relatively small panel of prospective insurers for Solicitors' PII and yet many brokers - large and small - try each year to persuade us that they can do better. There are many ways in which the insurers who are available can be encouraged to do better, some of which are touched on above. However, there are four main parts to an effective review of PII:

• Having in place an effective risk management process, which should be well embedded throughout the firm and capable of being clearly demonstrated to brokers and (through them or directly) to insurers.
• Planning what shape of insurance programme is required, what financial tolerance the firm has for carrying excesses and smaller claims and the relative importance of the various parameters.
• Conducting a detailed and effective review of brokers, to enable a choice to be made. This exercise is quite separate from the insurance market and will appoint a broking company with which you can obtain quotations.
• Working with the appointed broker to obtain the best terms from the insurance market, making use - on the basis of a structure agreed in advance - of that broker's contacts, expertise and persuasive talents.

We can help you with any or all of the above, but we find that the two absolutely key areas are

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There are so many variables that it is not possible to give accurate costings for this area of work in advance. However, we are confident that you will find the level of support which we can provide - and the results which will be attained - to be excellent value for money.

As an indication, typically the cost of managing a broker review would work out to be between £2,500 and £3,500, plus VAT.

The cost of initial consultations [to establish where you are in this context, where you want to be (on an informed basis) and what resources (internal and/or external) are best used to get you there] would not normally exceed £1,000, plus VAT.

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We would relish the opportunity to show you our worth in these areas. Please contact us to book an appointment or to discuss your requirements.

uncommonsolutions
Value for Money by design ...
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