It is no secret that the professional indemnity insurance (PII) market has been a challenging landscape for many in recent years. Businesses across all sectors have faced rising costs, tightening terms, and even the inability to secure adequate cover. For conveyancing firms, the impact has been particularly severe, exacerbated by numerous factors such as the fallout from Brexit, COVID-19, and the Stamp Duty Land Tax (SDLT) holiday. However, as we all know, the insurance market is cyclical and this year there have been promising signs of a gradual softening in the market which has brought renewed flexibility and greater choice in securing coverage.
A hardening market no more?
Over the past few years, a hardening market has led to insurers either increasing premiums dramatically or exiting the market altogether due to concerns about potential risks. This was especially evident in the aftermath of events like the SDLT holiday, which heightened fears of claims due to the rush in property transactions and the potential for errors. The impact of this was felt by mortgage advisers, independent financial advisers and law firms alike, with firms often left scrambling for cover and some being forced to accept poor terms just to remain operational.
In response to the challenges of a hardening market important steps have been taken to mitigate the impact. In 2023, the CLC revised its Participating Insurers Agreement (PIA), introducing minimum terms and conditions. These revisions helped align both firms and insurers in managing risks more effectively, ensuring that firms are not left with inadequate policies, such as those lacking essential run off cover. As a result, we have seen a 100% compliance rate in our latest PII renewal round.
New entrants and increased competition
This year we also saw a number of new entrants to the market which has increased the diversity of offering from insurers, this has allowed firms to shop around for better terms, not only focusing on price but also on the service provided by brokers. Firms now have the flexibility to choose insurers based on the quality of service, feedback, and support rather than just the cheapest option. This shift represents a positive trend where brokers and insurers are seen as partners in risk management rather than just transactional counterparts.
Additionally, we have seen those insurers who have entered this year managing the market better by entering into partner arrangements. These dual written policies spread the risk profile meaning there has been some improvement in terms offered. This increase in collaboration and willingness to underwrite has created more flexibility in the market. As such, the mix and balance of insurers available now offers more opportunities for firms who are looking to switch and hive off as there is greater scope for PII coverage for a broader remit of work.
Previously, firms with less than two years of trading history had told us that they faced more difficulties in changing to an alternative insurer, than more established practices did. Happily, this year we saw no evidence of this. Indeed, practices were able to obtain terms irrespective of their type of business structure, or the length of time that they had been trading. However, as expected, firms with poorly managed claims histories or those engaged in high-risk areas still faced challenges. As such firms who this applies to are needing to continue demonstrating robust controls and records of transactions that show sound judgement and technical expertise. However, the overall environment has become far more supportive for the majority of businesses.
Looking Ahead
While the 2024 PII renewal season has been markedly more successful than in previous years, risk factors such as the implementation of The Building Safety Act 2022 will undoubtedly require close attention from insurers, brokers, and firms alike.
Stephen Ward is director of strategy and external relations at the Council for Licensed Conveyancers
