A quarter of firms are seeking longer term insurance policies as they cash in on a more positive market, according to a broker. A report by Howden has revealed that appetite for policies lasting more than a year has returned, with 26% of law firm clients that renewed in April choosing this option.

Only 3% of firms signed up to a longer policy in April 2023. In October 2021, Howden did not have a single firm choose to sign for more than a year.

The broker also reported that 16% of firms in the past year have moved insurer – the highest proportion for six years.

Firms shopping around and signing up for longer policies – which generally last for 18 months – are signs of a softening market.

Three new insurers have signed up to the Solicitors Regulation Authority’s participating insurers agreement in the past 18 months, while existing insurers were also willing to be more flexible on the terms being offered.

Howden’s report states: ‘As we approached the 1 April renewal we saw a number of underwriters relaxing restrictions on new business, with some increasing the amount of conveyancing work they were prepared to consider as a percentage of a firm’s overall gross fees.

‘This meant there was more choice for some firms. Insurers that had previously been closed to them were now interested in reviewing their proposal forms – and offering a quotation.’

Rate reductions were reported for many law firms, including those with a heavy reliance on conveyancing work.

Looking ahead to the October renewal period, Howden said underwriters are keen to retain and attract firms they consider to be ‘good’ risks, with many prepared to continue relaxing some of their rules such as caps on the percentage of conveyancing work.

Historically, claims against solicitors have increased during times of economic uncertainty, for example during the recessions of the early 1990s and 2008. But the Howden report concluded that the backdrop to the current economic challenges is producing different outcomes.

‘Lending practices have been more disciplined in recent years and we have not had the same level of activity in the new build/buy-to-let market. These were significant factors leading to the tsunami of claims during the troubled times of 2007/08,’ said the broker. ‘Risk management within law firms has also developed considerably through the intervening years.’

Claims relating to residential conveyancing work (26%) are still the most common, but this proportion has dropped steadily in the past five years. At the same time, claims against firms for wills, trusts, probate and estate administration have risen steadily and now make up 20% of notifications. Howden said this is an area where firms should focus their risk management and tell underwriters that they have done so.

 

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