Your shop window to insurers – How to use it effectively – Part 1
Depending when you renew, you could be vying for the attention of an underwriter’s time with hundreds possibly even thousands of your peer group so it is important that you make an effort to stand out from the crowd. After all, your renewal presentation is effectively your shop window to insurers so it is imperative that you use it effectively.
Practices should be looking to present their business as they would to an external investor if they were looking for a loan facility. Presentations often fall well short of this standard and can reflect poorly on some practices. It is important that you take the time to prepare a detailed presentation that represents your practice appropriately. Remember, it is not only about the work that you undertake, it is how you do it. If you do not take the time to articulate to insurers how or why you should be treated differently, then why should you expect them to differentiate your practice from the rest of the crowd?
Presenting your practice in the right way
An underwriter, when providing you with terms of insurance, will be putting their company’s capital at risk. It is therefore important that we help establish the right opinion of your practice and that means presenting your practice appropriately. This will include addressing any potential concerns that they may have, in light of your activities, after all the easiest thing for an underwriter to do is to say ‘no’.
It is now common practice for many insurers to adopt a peer review system prior to the issuance of any terms. Acknowledging this fact, you may be looking for more than one underwriter to buy into your practice. Appreciating how insurers assess risk, (see The Art of Underwriting), you should then think about how you wish to present your practice.
Under the Insurance Act 2015 you have a new duty to make a fair presentation of your risk. To meet this duty you still need to disclose all material information in connection with your legal practice to insurers, which is known to you. Information is material, if it would influence the judgement of a prudent insurer in establishing premium or determining whether to underwrite the risk and if so on what terms.
Striking a balance
Whilst in light of the act, it is incredibly important to share all of the key points about your practice along with all of the softer facts of your business. However, providing your office manual is unnecessary, as Winston Churchill once said:
“The length of this document defends it well against the risk of its being read.”
We know that the unique characteristics of a practice should influence the underwriter so what additional material information should be included in a presentation beyond the proposal form and insurer claim summaries, which generally contain the “hard” facts about your practice?
Introducng your firm to the PII insurer
Taking the points above on board, I would recommend providing insurers with a foreword about your practice. This should begin with a short history of the practice advising insurers of your past, effectively articulating the journey that your practice has taken to get to where you are today.
After the brief history this foreword could include, the structure of the practice, the culture of the firm; which could be influenced by the layout of your teams or office(s). Articulating this will help the underwriter visualise the working environment, especially if they have not had the opportunity to visit your office.
It will also be advantageous to highlight to insurers what your current goals are along with your plans and aspirations for the future. If you have a business plan, then it would be prudent to share this document with insurers.
Your Client profile and how you mitigate risks
An overview of who your typical clients are is key. Despite the work undertaken being classified the same, not all clients that you act for will be considered as identical in their risk profile so giving the underwriter a better understanding of not only what you do, but who you are doing it for could pay dividends.
If you are acting for perceived higher risk clientele, how are you mitigating the risks associated with this?
- Acting for Ultra High Net worth clients may be perceived a greater risk than acting for the general public.
- Acting for PLC’s would be a greater perceived risk when compared to a firm that is acting for commercial SMEs
Further to understanding who your clients are, insurers would also like a deeper understanding of your business model, in particular where you get your clients from and how business is obtained. Providing this information becomes increasingly important for practices that have no website or online visibility, as a prudent underwriter should be intrigued as to the long term viability of your practice.
Ultimately to address this, you should be detailing if you pay for referrals and business introductions or if all enquires are self-generated through marketing and business development initiatives including your website. If your new clientele are all from referrals from existing clients or they come from other non-paid for introductions from other professional service firms. It may well be the case that your new clients are a combination of all of the above.
Disclose material risks and summarise
Ensure that within your presentation you addresses any complex issues and disclose all material facts whether that be any regulatory issues or claims that you have experienced. Insurers often favour practice’s that provide a clear summary of the supporting evidence or you could make your presentation too document heavy. You can always offer to provide this further information upon request or if you do wish to provide all of this information do so in the appendix – making clear reference to it.
What to do if you have had PII claims in the past?
If you have experienced claims, it does not mean that you will be uninsurable but it is most important to articulate the lessons that have been learned from the experience. Importantly articulating what measures have been implemented to prevent a claim from happening again will be the key to satisfy the underwriters.
Stating that a fee earner who was responsible for a particular claim or claims is not going to be in the future is not necessarily the answer insurers are looking for. Underwriters will be interested in knowing if the supervision changed? What happened for this claim to materialise? And why did it happen?
Insurers want to see actions and understand what has changed to prevent a recurrence
If the claim(s) that you have experienced has stemmed from one fee earner, have you undertaken a review of their work to ensure that there are no more skeletons in the closet? If you do not address this issue, it could make you less attractive to another insurer and then reduce potential competition for your business.
Perceived systemic claims issues are frowned upon by most underwriters upon much more so than a practice that has experienced a single large claim. Therefore, insurers will expect if a practice has experienced multiple claims from the same area of law, they wiull have actively done something about it to prevent similar occurrences going forward.
Non-core legal work from an insurance perspective
If you have begun to undertake a particular area of law but do not have a deep skill set in that particular area of law this is an obvious risk. Could you buddy up with a firm that does, to ensure that you are not left with a raft of claims for failing to identify issues on those files? An article on the Lockton solicitors website entitled Beware of the Cuckoo is worth reading, this article highlights the importance of due diligence in your interviewing process to avoid hiring potentially hazardous staff members.
Risk management from a PII perspective
Risk Management is an incredibly important component of the foreword, and should provide the underwriters with real comfort about your practice. To get comfort underwriters will like to know what you do to mitigate the risks associated with the legal work undertaken. It is not always about what you do, it’s the way in which you do it!
In light of this, whist this is not an exhaustive list you may wish to articulate items within this section such as:
- What is your client on boarding process
- Does this change on your new instruction process?
- How are matters classified
- Do higher risk files have greater scrutiny or supervision?
- Is there a firm wide system that risk grades matters
- How easy is it to identify high value files?
- What is the frequency of peer reviews and file checking
- What is the file selection process?
- Is this just internal, external or a combination of both?
- Do you have centralised controls?
- Do you have the ability to monitor live progress of matters
- Can you monitor individuals work load to minimise mistakes but also stress
- Are risk flags raised if matters stall or files remain open with no actions?
- How do you manage the risks associated with a fee earner having a dependency or significant reliance of work emanating from one introducer or source?
- What are the payment and financial controls within the practice? e.g. dual factor authentication.
- What is your approach to cyber security?
- How do you address training and raising awareness of staff
Throughout this document, it is incredibly important that you are proud of your legal practice. Highlight to the underwriters all of the various accomplishments that you and members of your team have achieved. This may include accomplishments achieved such as Lexcel, CQS, or other specific accreditations. You may wish to include items such as listings in Legal 500, winning specific awards or even being shortlisted for honours.
For those practices that encourage customer opinion and feedback, you may include a summary of your reviews along with the aggregated score received. Insurers will be aware of the fact that there are numerous active customer review sites such as Google, Trust Pilot and Review Solicitors.
Get a how-to guide to completing your proposal form – see Part 2
In Part 2 I talk you through how to complete your proposal form to achieve the best outcome. If you would like assistance with any aspects of your PII for your legal firm our experienced team at Lockton would be delighted to help.