An insurer's view


The renewal date for solicitors' professional indemnity insurance changed this year from 1 September to 1 October. Most practices will have already submitted their renewal forms, but it may be the case that they could have saved on their insurance costs by taking a systematic approach to their renewal and providing all the supplementary information required.



To assess properly a firm's risk, insurers need detailed information about any large one-off claims or a grouping of claims, which can indicate a systematic problem. They are likely to ask questions such as: 'How did the claim arise?' 'What is the current position of the claim?' and 'What steps have been taken to prevent or limit recurrence?'



In a worst-case scenario, not providing this information at renewal stage could lead to cover being declined, something almost all firms will want to avoid. It clearly pays to keep insurance records up to date throughout the year.



Effective risk management in the form of either Lexcel or another risk management programme has benefits of minimising claims and making a firm more attractive to an insurance company. Good risk management becomes obvious to insurers through a firm's claims record and can result in a lower premium and excess level. However, it is only effective when adopted as part of the overall business strategy and is used by all staff.



A large number of bulk conveyancing, personal injury and trust and probate claims can be avoided by proper risk management. This can include close supervision of all active files, a centralised diary system (backed up) that provides for absences and ensures that limitation periods are not missed.



The proliferation of electronic communications has also affected how law firms approach risk management. For example, issues of confidentiality can arise with Internet forums. Solicitors need to have guidelines for e-mail and the Internet to avoid publishing confidential or defamatory information. Sensitive internal e-mails that may provide employees with the incentive to pursue discrimination claims should also be governed by strict rules.



Any firm that can demonstrate that risk management is a fundamental part of its business approach, whether it is via a Lexcel accreditation or an in-house programme, will gain the support of insurance providers. Equally, risk management's value extends beyond insurance, enhancing the profitability of a practice and the ability of solicitors to provide a consistently high level of service.



This column was prepared by AFP Consulting, a division of Alexander Forbes Risk Services