Controlling & Managing Your Professional Indemnity Insurance Premium
For a number of law firms the current renewal season is or has been a testing time, with less than a month to go, many firms are still waiting to secure terms that are acceptable or are accepting increases in premiums that were not planned for.
The causes of the increased premiums or difficulty obtaining cover are multiple. Some of which firms cannot control and others which they can start to influence.
If your firm sits in a category of struggling to find terms, the reality is that it is too late to make a significant difference now and terms will need to be agreed upon on the best possible basis. This does not mean it is impossible to achieve a reduction or improved terms and once renewed, firms have 12 months + to organise themselves to secure such discounts.
With the general market conditions driving premiums up, many law firms must look to ways of establishing with the Insurers that they have risk and compliance under control and can actively demonstrate this through focussed and robust procedures. It is not sufficient to have a good or positive claims history.
Prove Sustained Risk Control
Insurers are well aware that whilst history will give a good indication into the type of firm and attitude to risk, the current processes and recent history is more relevant as this is where the claim will arise.
Being able to actively show your insurer that through the application of the firm’s policies and procedures they can prove sustained risk control, will provide some comfort to your Insurer to consider their approach when underwriting your firm and setting the premium.
Unfortunately, too often, firms are not able to demonstrate their approach as although policies are in place, the application and evidencing of such policies with consistency is lacking. Although in principal the management of a robust risk and compliance policy should be straight forward the reality is often different. This is particularly so for firms who do not have a compliance team or manager, leaving it to partners who are also fee earners alongside running the firm to undertake the administration surrounding compliance and as a consequence the admin elements can slip.
It could be argued that a firm that does not have fundamental issues, and only the administration is lacking, should not be penalised. Unfortunately however, neither the SRA, nor PII will accept such a proposition. Insurers, and likewise those whom work for the SRA, are responsible for controlling and managing a firms’ risks, and will get no favours for accepting an assertion without evidence.
The solutions are not as straight forward as they may seem and require focus and dedication alongside the appropriate presentation to the Insurers to demonstrate their activity and controls that lead to the firm being viewed in a more favourable light. In this article, we look at solutions law firms may wish to consider when trying to control their premiums.
So how can firms control their premiums and seek to secure discounts or even reductions? The following sets out some of the areas firms may wish to consider:
Policies – Development of clear and bespoke policies that are reflective of how the firm operates providing clear direction to the staff and adopts best practice which may result in changes. Once base policies have been delivered it is essential to keep them up to date with the changing regulation and legislation alongside development of the firm. Policies must cover all the components part of law firm management which extends beyond risk. For more information on the policies that a firm needs, please contact us to discuss.
Procedures – Contained within the policies should be the firm’s procedures which set out a step by step instruction and guidance on the expectation of each individual taking into account their role and department. It must be clear to the staff in the firm how they comply with the policies and the requirements must be well communicated with training provided.
Officers – Ensure that the compliance officers in the firm are of suitable standing and provided access to the necessary resources they need to fulfil their role and function and where they struggle for time, provide them with internal resource or external support.
Notification – Ensure the staff are provided with a simple and effective way to present issues that arise making it clear when and what to notify and to who.
Registers – The effective maintenance of registers is essential. The registers are the firms ‘go to place’ for where all of the information is held on issues as they arise, are dealt with and closed. The maintaining of registers is a major part of how the firm will manage risk and other issues and how they can demonstrate active implementation and control of their policies and procedures. Well managed and maintained registers are essential.
Regular Reporting – Firms have to be able to demonstrate that they understand the issues that are within the firm and that the key decision makers are equally aware of the issues and have access to information that enables them to manage. The analysis of information and reporting should be performed regularly, and monthly is optimum, but quarterly should be the minimum standard.
Risk Assessment – Best practice would dictate that all matters should undergo a risk assessment, even when the matter type lends itself to low risk. Adopting a firm wide approach ensures consistency and ensures the assessment is completed. Too often risk assessments are not performed, not performed properly or the results are not stored in the appropriate place. This is a weakness that firms must address.
A risk assessment must be performed:
- At the opening of every matter
- On an ongoing basis at critical points of a case as it progresses
- At the conclusion of the matter
Provision of information – Be prepared to share information with your insurers, provide them with the evidence of the work the firm does to manage and control risk and compliance even if this means going beyond what is contained within the proposal forms. Speak to you Broker or Insurer and invite them into the firm. Build a relationship which helps them understand more about the key decision makers in the firm, the overall approach to risk, how you manage risk and how you implement and maintain your policies.
As stated above, it is likely that there is insufficient time now to actively influence your PII premium if you renew in the next month. However, with premiums increasing and set to increase further, firms who embrace risk management and controls ensuring they are able to evidence this to support their assertions, will stand a much better chance of being looked at on an individual basis than those who do not or cannot demonstrate this. Next year’s renewal will come faster than you think so preparing now is essential.
The Strategic Partner works with law firms of all sizes to create effective risk management processes to improve the robustness of the procedures ensuring they are able to demonstrate to Insurers how the firm manages and controls risk. We have developed a cost-effective and consultative approach to the implementation of policies and procedures and have delivered packaged solutions to firms. We have developed 3 packaged solutions for firms that accelerate the achievement of a robust approach to risk management and compliance. Each of our services are independent of each other but combined, provide the ultimate solution for firms as either a complete outsourcing arrangement or to work in conjunction with the firms’ existing resources.
Training – Provide training that is effective. There is a wealth of training available through webinars but does this training meet the needs of the firm or are you simply ticking boxes? It is accepted that online prepared courses are an efficient way of training staff but training is also about ensuring there is education and learning. Choose your training packages carefully as pre-prepared courses can address principles, but are unlikely to cover the exact requirements of your firm. With firms and their staff becoming more comfortable with video meetings, firms should consider the engagement of bespoke training provided by video, where the trainer is present to answer questions and provide points of clarity. This is not to say that bespoke training packages should not be used. They have their place when addressing core issues that impact all firms but the bespoke and live elements are often lost. Too many firms accept that the training they use is less about expanding knowledge and learning and is as much about the provision of training as part of their regulatory duties.
Auditing – Auditing in a firm is also essential but firms need to think strategically about auditing. Firms are constantly monitoring files through supervision or various touchpoints such as complaints, compliance issues, undertakings, technical referrals etc. Without much additional effort, these files review can be classified as audits. Some firms adopt a process of peer to peer audits and reviews, but are they completed properly and are the audits effective? This is not about ticking boxes, however, active supervision provides control and a sensible audit regime will provide the evidence the firm’s needs. If you do not have the time or resource to audit internally, consider external auditing resource to assist. It may prove to be more cost effective and ensure the job gets done.
Risk Categorisation – Rather than allowing fee earners to establish what they consider to be high risk, firms should seek to pre categorise what is high risk by matter type and train their staff. This pre categorisation takes away a significant amount of the subjectivity in risk assessments. If the staff know what would fall into a high risk category and the action they should take, in advance of performing risk assessments, the firm will have a more active and controlled approach to risk.
For more information on our packaged solutions click the links below:
- Regulation and compliance – Delivery of the required policies, procedures, notification forms, registers, checklists, training and auditing.
- Compliance Administration – Ongoing management of a firms registers and documenting and reporting on risk and compliance matters including day to day guidance to staff.
- Office Manual and Accounts Procedures – Documenting a firm’s operational and accounts provides and overall application of the SRA Accounts Rules.
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