An inability to obtain reasonable and suitable professional indemnity insurance (PII) has become a real danger for many law firms, as it is progressively becoming the reason they face financial problems. This, coupled with the frustration of increasingly difficult trading conditions, has made PII premium prices one of the core cost drivers for many organisations. Despite this, there are still numerous tactics a firm can adopt to keep PII prices down without prejudicing the protection provided.

First, make sure you understand the insurer’s view – what they like and don’t like about your business, and what their key areas of interest are. How the key risks are explained and presented by clients has a significant effect on premiums quoted.

Next, benchmark your premium and self-insured excess. The balance between the premium and excess is often not cost-effective. Give a sense check to your current excess and premium levels to ensure the balance of the two are right for your firm. Your broker can help you make an informed decision over your placement and ensure you see the premium benefits of your current or proposed excess levels.

Always have a game plan and ensure you approach insurers with a clear strategy; having a target to aim for greatly increases the chances of hitting it. Entering the insurance market without knowing what you want to achieve significantly lowers the chances of achieving outstanding results. Why do brokers have to use last year’s premium as a reference? It is important to understand your unique circumstances and obtain terms that are right for your firm.

Have an independent assessment of the way you currently present your information to insurers and the content of your proposal form. Your broker should be able to compare your firm against many others in their portfolio, both in terms of premium paid, and how your ‘pitch’ to insurers (the proposal form and additional information) looks.

Prevention is always better than cure, and having effective risk management strategies in place can help to prevent claims and circumstances occurring. This can greatly assist in ensuring your PII premiums are kept to a minimum and demonstrates to insurers that you are willing to use resources available to help protect you and your insurers from claims.

Above all: start early. Given the critical importance of PII, it is advised to start the renewal process in good time. Leaving things to the last minute can seriously affect the terms you are able to obtain.

Colin Taylor is executive director at Willis

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