The Impact of Covid –  what we have seen so far

Prior to the Covid-19 pandemic, the insurance marketplace showed signs of ‘hardening’, which means placing solicitors’ business with insurers has become increasingly difficult and potentially more expensive. As a result of these changing conditions, many law firms were required to supply additional information to Insurers beyond the standard proposal form.

For quite an extensive period of time, practices have been able to conduct their renewals on a very straightforward basis, with many Insurers offering ‘quick’ or ‘early renewals’, whereby practices are required to provide very limited information. Whilst this still continues, the volume of practices these types of renewals are offered to have significantly reduced, with many Insurers in the October 2019 and April 2020 renewal periods asking for increased supporting information before they would consider offering any terms.

The increased popularity of working from home or reduced working weeks have meant fragmented workforces, well before the pandemic, where employees saw balance, Insurers saw an increased risk, therefore a heightened requirement from Insurers to know what measures are in place to enhance supervision, governance and oversight. Insurers have always been concerned with law firm supervision and oversight within a practice but now many of us find ourselves in a new and very different working environment, with some key members being perhaps furloughed this has heightened further.

As a result, we anticipate that the Covid-19 pandemic will result in an increase in even more information being requested. Insurers naturally wish to align themselves with good businesses and will be asking more questions to help them identify those practices with robust business models, who can weather the current storm. Practices should expect to provide detail on operational processes and working from home capabilities. This will naturally include an overview of the supervision and governance that is in place.

Whilst questions will naturally evolve, our initial observations of areas to address include:

  • We would encourage practices to articulate how they are ensuring that the quality of work remains first class.
  • What measures have been implemented to ensure that deadlines are not missed and things that need to be done timeously are completed on time?
  • How accessible is the entirety of a client’s file? – Therefore ensuring that fee earnings can see the full picture when providing clients with advice?
  • Expect greater scrutiny on the financial position, this is likely to include providing full details of measures taken to protect the long term viability of the practice, e.g. loans, the volume of staff furloughed and any alternative future plans.
  • What, if any, new processes are being deployed in respect to Client Account/ transactional protection and how is your practice protecting your clients’ money (and the insurer’s balance sheet)

Whilst Insurers will want to know what steps practices have taken, we also expect them to be neutral and if practices have taken steps it will not be viewed negatively, they will need to evidence an understanding of the rationale behind decisions made.

Additional considerations:

Understandably, many firms will be faced with the burden of keeping fees as stable as possible and in turn, some solicitors may decide that one method to increase fee income is to offer clients and prospective clients legal services in areas of law in which they haven’t previously practised. However, dabbling in new areas of work can be detrimental to your practice in the long term. Acting on the odd bit of ‘other’ work that you do not have expertise in is not a risk worth taking. The potential lasting effects of dabbling can be disgruntled clients, claims and subsequently increases in your insurance premium; the downside of these far outweigh what might be earned from doing this work. If your firm is looking to offer a new area of law Insurers will want to be confident in your expertise and importantly what type of clients you are doing this work for.

3 Steps to help navigate the challenges ahead:

  1. Firstly, we recommend starting your insurance renewal as early as possible. The insurance market conditions are expected to be increasingly challenging, with many Insurers already feeling the immediate impact of loss in relation to COVID19.
  2. Prepare a quality presentation – the quality of your renewal presentation can differentiate your firm from the crowd. Any prudent Underwriter will naturally be adopting caution and it is important to remember that you will be vying for their attention with a plethora of practices, a detailed presentation will mean that you will be starting on the front foot and Insurers may well be more accommodating.
  3. Lastly but of equal importance is the selection of your representative will need careful consideration, do not approach multiple agents that overlap with Insurers. Establish who they can approach directly before you provide them with your information, some may scatter gun the enquiry which could put you in a difficult position. Agree on a timeline including deadlines for the presenting options way before your impending renewal date.

To find out how Lockton can assist your practice with the impact of COVID19, please contact myself or a member of the Lockton team

Brian Boehmer, Partner, Lockton

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Lockton provide solicitors with professional indemnity insurance solutions, alongside a full suite of insurance and risk services. With access to A-rated markets, whether you’re a multinational LLP or a small business, we can give deliver best-fit, great value PII solutions for your business. As well as Professional Indemnity insurance, we also offer a full suite of additional risk solutions including asset/insolvency protection, management liability and risk, claims and employee benefits consultancy.

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