Remaining Vigilant – the secret of long term success
Why investing in risk management training can make a real difference
For many the main Professional Indemnity Insurance (PII) renewal on the 1st October last year was one of the most benign renewal seasons we have seen for some time. Although some will have seen rises in premiums, most saw rates stabilise or slightly reduce and many opted for periods of cover longer than 12 months.
With the economy (slowly) recovering, fee income for the legal profession as a whole seems to picking up, especially in the areas of conveyancing and general property work. (There are exceptions of course and the Personal Injury market remains a challenging area.) At the same time we are seeing a plentiful supply of insurer capacity for PII and even noticing new insurers coming into the solicitors’ PII marketplace.
PII is no longer the problem it was three to five years ago when we were suffering the fall-out from the credit crunch and the property price crash of the late 2000s. Professional indemnity premiums always run converse to the economy: when the economy is strong; claims tend to be low and so do premiums. When the economy goes into recession, claims against solicitors increase and, as a result, so do premiums. When the economy starts to recover again claims start to reduce and insurers are attracted into the PII sector by the improving claims and relatively high premiums. This increase in supply can lead to over-capacity and premiums starting to fall once again. This cycle repeats itself over and over.
So times are improving, but it pays to remain vigilant. History has shown us that a period of increased workload is when many mistakes are made: mistakes that can crystallise into claims in the next four to six years when perhaps the economy sees another turn in its cycle. It is important, therefore, to ensure you continue to invest in risk management training for all staff particularly in the areas of client engagement and cyber risks.
The Solicitors Regulation Authority (SRA) is urging law firms to increase their cyber security measures amongst fears that cybercrime is escalating; it occurs frequently as a priority risk in the SRA’s Risk Outlook. Cybersecurity is also an area of concern for professional indemnity insurers and the Information Commissioner’s Office (ICO) following an increase in the reporting of data breaches involving the legal profession. The ICO can impose significant fines for a serious breach of the Data Protection Act and professional Indemnity premiums can be seriously affected. Although good systems are important it is vital that all staff are well informed and identify issues early and encouraged to raise any suspicions of phishing etc.
Firms that do invest now will see a return on that investment with fewer claims, business disruption and reputational damage. It will also go a long way to ensuing greater stability of insurance costs next time the economy decides to take a turn for the worst and the next cycle of the market begins again.
Colin S Taylor CIRM,
Willis Towers Watson
T: +44 20 3193 9418