Obtaining professional indemnity insurance cover is necessary for legal firms. However, it can also be considered as one of their significant expense. While some lawyers would consider professional indemnity insurance an unwelcome cost, it can be a lifesaver when things turn awry.
Solicitors professional indemnity insurance offers financial security and coverage to firms when they require it most while ensuring the public interest protection for civil liability claims.
Here are some key factors which can affect the cost of solicitors’ professional indemnity insurance and may even jeopardise the company’s ability to get professional indemnity protection in the future:
1.Area of Practice
A lawyer’s area of practice can affect the cost of solicitors’ professional indemnity insurance cost and may even dissuade some insurers to offer the policy. Some of the high risks of areas include personal injury, conveyancing, wills and probate.
Usually, conveyancing is mainly scrutinised by insurance companies. As conveyancing can continue to go for years, it can certainly increase the cost of solicitors’ professional indemnity insurance. To avoid cash flow struggles, it is essential for solicitors to approach a specialised professional indemnity provider who can help them secure the right insurance policy. Nowadays, many insurance companies also offer a long-term policy which allows companies to get additional peace of mind for a longer duration.
Before issuing solicitors’ professional indemnity insurance, the insurer will evaluate the lawyer’s claim records for the past five or ten years to assess the barometer of the future incidents. Here the size and frequency of previous claims would be taken into account, and thus, it will have a major impact on the premium. It means, if you’ve had the claim history in the past five or six years, then your choice of insurers would be limited. Also, the cost of professional indemnity insurance will be high.
Read more: Professions for Which Professional Indemnity Insurance Becomes Mandatory
To reduce the possibility of being refused the insurance cover on the basis of claim history, it is necessary for the solicitors to keep track of their claim history. As well as documenting what happened and why it is also necessary to list down procedures which solicitors have put in place to curtail the chances of recurrence of the event.
In the insurance field, the deductible is the amount that the policyholder needs to pay first before the insurer settles the remaining amount. By opting for the high deductible limit, the law firm can cut its premium costs. However, it also means that at the time of claim settlement, the law firm would have to pay a substantial portion of the claim from its pocket before the insurer settles the remaining claim amount.
Full-time versus part-time lawyers is an essential factor which decides the premium of your policy. Most insurers offer a significant premium discount to those lawyers who work part-time or have limited working hours. If a full-time lawyer is thinking to curtail their premium cost, they should approach their insurer to discuss its impact on their insurance policy.
5.Claims Made Vs. Occurrence
Usually, most of the professional liability insurance policies belong to one of the following variants:
In case of occurrence policies, the effective dates are defined, and they will cover all those claims which occur during the coverage tenure, regardless of when the claim is reported to the insurer. Conversely, claims-made policies offer coverage for those claims as well which occur after the retroactive date of the insurance policy, irrespective of what the effective dates of the policy are. Usually, claims-made policies are costlier than occurrence policies. It means you would have to pay an extra premium if you opt for claims-made insurance policies.
See: Importance of Professional Indemnity Insurance for Doctors
Professional indemnity insurance issues policies as per the limits requested by the law firms. The amount of per claim will directly impact the premium. How much coverage you opt for under professional indemnity insurance policy help in deciding the premium rates. The more extensive your coverage is, high will be your premium.
The factors listed above clearly show that there are many features which can have an impact on the annual premium of a lawyer professional indemnity insurance policy. Although it may sound exciting to save money by trimming the coverage, it is only advisable after knowing its after-effects.