Insurance renewal quotes could be at least 30% higher when firms come to renew their indemnity cover this autumn, the Law Society has warned.
The majority of firms still renew their professional indemnity insurance on 1 October and the traditional bottleneck this causes is expected to be exacerbated by the current climate.
Firms are being urged to speak to their brokers now rather than leave it any longer, and to be prepared for the costs to have mounted since they last renewed. The effect is likely to be most pronounced for firms coming out of an 18- or 24-month policy.
‘Firms should brace themselves for an average increase of 30%, but those with bad claims histories should expect far higher increases,' said Simon Davis, Law Society president. ‘Covid-19, the uncertainty of Brexit negotiations and the fact the market was hardening already in 2019 all combine to mean that October 2020 could be the most challenging period for solicitors since the insurance market opened up in 2000.’
Davis said insurers are reluctant to take on new risks at the moment and many are not seeking new clients. Those firms they are prepared to work with may need to provide extra information such as details of as risk management, financial performance, furlough scheme use, continuity planning and evidence of ongoing profitability.
Renewal trends for March and April, collected and analysed by insurance broker Lockton International, found that firms’ premiums increased by an average of 15%, but firms with turnovers of £50m to £100m faced increases of around 40%.
Firms are being advised to review their budgets and make provision for increased premiums, which may involve premium financing to spread out payments. The government’s coronavirus business interruption loans scheme can also provide finance to businesses with an annual turnover up to £45m, but it closes to new applicants at the end of September.