Law firms face the next major challenge as the traditional PII renewal date of 1 October fast approaches.
Managing partners and risk professionals will be eager to understand how the coronavirus pandemic will influence insurers’ appetite for providing coverage for professional services firms. With headlines such as ‘60% of high street law firms face closure’ featuring in the national press; early indications are that insurers will approach renewals even more cautiously than under normal circumstances this time around.
We have already seen firms receive probing questionnaires issued by insurers which differ from the usual pro formas. Examples of additional information requested include greater detail on finances (and therefore on the financial security of the firm) and – perhaps unsurprisingly – queries around business continuity plans and preparedness for any future disruption to normal practice.
Trying to interpret the forms and to understand the underlying requirements is going to be a challenge. Legal Eye has undertaken an in depth analysis and produced a risk analysis tool to enable firms to provide a bespoke report on their firm’s approach to managing risk and financial management – including the key themes identified as central to insurers’ considerations this year.
This report provides a factual description of how your firm has tackled the unprecedented challenges presented this year so far; how ‘business as usual’ is being safeguarded as far as possible, and outlines a robust risk management approach covering adaptations which will need to be made to the running of the firm in the future in order to protect the business.
We believe that insurers will look favourably on these reports and hope that they will assist not only in achieving renewal but may also help in achieving a lower premium than for those firms without such a report.
We are living through an incredibly uncertain time. No one can predict with total certainty how insurers will behave and react at this time. What we can however say for certain is that early engagement with your broker and the fulsome provision of well thought-through and well-presented information will further your case and heighten your chances of achieving a positive outcome through this renewal period.
If your business can proactively provide advanced disclosure, not just of financial planning but also of potential claims or complaints, and the documented processes that you are changing in order to ensure those situations do not arise again, it will go a long way to reassure the insurer that your firm is run professionally and with foresight and in a way that reassures not only insurers but also your clients and suppliers that you are doing the best that you can in these current circumstances.
Neither should firms be concerned if the risk analysis doesn’t paint a 100% perfect picture. Insurers will appreciate the objectivity of the analysis and be impressed by the associated action plan for acting on the identified areas for improvement. It shows proactive management, planning and a practical viewpoint – all major pluses for insurers who are looking to establish the true position of each client.
From my view on the market we do not think that the position is all doom and gloom. Many firms have put into practice their business continuity planning and have changed and reflected the market place in their business planning. However, when it comes to completing insurance renewal forms, very often firms do not see the benefit in disclosing this planning and disclosing additional information surrounding the excellent processes that they have.
Essentially it is approached as a form filling exercise when in reality it should be far more than that. Continued communication with your broker is by far the best way to ensure that your insurers are fully aware of the circumstances of your firm which enables them to give a fully informed view on premiums.
Providing your insurer with responses to specific questions and report on both your financial and compliance well-being is one of the most practical and proactive steps that can be taken easily and in advance of the renewal period.