Legal Insurance Market Review 2025
What does a cyclical insurance market mean for Solicitors PII?
After a number of years in the “Hard Market” cycle, which saw premiums go through the roof for some firms, the Solicitors PII market has levelled off and started moving back towards a “Soft Market” cycle.
We use the word “cycle” advisedly, because the PII market for law firms has always been, and will always be, cyclical. Rates will rise to accommodate increasing costs of claims, amongst other things, and then new players or an easing economy will trigger greater appetite and the competitive market that this precipitates. Premiums will then fall to a low level which, by its very nature, will see loss ratios increase and the whole carousel goes round again.
Throughout this cyclical market, it is those firms that can demonstrate their sustainability, their robust approach to assessing and managing risk and a proactive approach in managing their business that do best, with the difference between a positive result and negative result being exaggerated depending on whether the market is in “Hard” or “Soft” cycle.
What to expect in 2025
Thankfully, the market is moving into its soft cycle in 2025 and this is likely to run into 2026 barring any significant economic changes, so it is a good time to put your current insurance providers to the test.
Continuity is always a desirable aspiration to have but it is important to ensure that your insurers are offering you a deal which reflects the current market trends and, at the moment, this should be nothing less than rates level with 2023/24 renewal but more likely a reduction.
Get your proposal in early to allow as much time as possible to benchmark the market but also to allow plenty of “wriggle room” to negotiate. With the competition that now exists between insurers, you may be able to match the best deal with your existing insurer, so always let them have the “last bite of the cherry”.
Tricks of the Trade
You must be mindful of course, that you are not “duped” into accepting a deal which is unsustainable for the insurer. When the market does start to turn, these are the deals that get hit first and hardest, so think carefully about whether the offer seems too good to be true – we all know the old adage.
If your new insurer decides that yours is not the risk they first thought it was and decides to increase their premium to reflect this, and sadly we have seen examples of this, your previous insurer may not be keen to take you back, which could leave you as a distressed buyer in a distressed market, and that is not a good place for anyone to be in.
You must also be mindful of brokers trying to “buy in” your account by low balling their fees. In order to provide a high level of service, they need to cover their costs and if they are not earning enough to cover the work they are doing, you may find that you will be looked after by a less experienced, more junior team and the service levels will begin to drop off.
This might lead to a situation where your adviser is not where you need them to be if you find yourself in a situation when you need guidance from someone who is more interested in your firm’s well being than in how much money they are getting from you!
Think laterally, not literally
There are many things your broker can do for you besides placing your PII programme.
There are other key insurances such as management liability and cyber protection which are regularly in the headlines and if your broker has not already discussed these with you, you should be asking them why not. These are important layers of protection for the Partners/Directors of any practice as well as the business itself so it would be remiss of an insurance provider not to cover these with you.
However, there are other ways your broker can demonstrate their knowledge of your sector rather than theirs.
It should be a given that your broker will know about the insurance sector but having a broader understanding of the legal sector empowers your broker to provide more holistic guidance for you.
Everyday requirements of the business such as Legal Indemnities, Warranty & Indemnity deal protection and unoccupied property protection are important issues for you and your clients and advice around those lesser understood issues can be invaluable, whilst also demonstrating how well your broker knows your business.
Regulation and compliance is an ever changing landscape which can be difficult to keep up with at times and support in keeping on the right side of the regulator can save you money as well as sleepless nights.
Think laterally about what your broker does for you and whether they could, and indeed should, be doing more for you.
In summary
- Get your submission in early
- Watch out for offers that seem too good to be true
- Make sure the cost is in your favour but is also sustainable for the insurer
- Take advice from a broker that knows the sector, not one that just knows the “price of everything but the value of nothing”.