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Cybercrime: the elephant in the room impacting Professional Indemnity Insurance?

Cybercrime: the elephant in the room impacting Professional Indemnity Insurance?

Professional indemnity insurance (PII) remains one of the largest business overheads for law firms along with salaries. The cost of premiums from different insurers can vary significantly depending on a firm's specialist area of expertise, with commercial work and conveyancing considered to be particularly high risk.

Encouragingly, PII policies have fallen and are becoming more competitive in recent years due to law firms having a wealth of rated insurers to choose from. The end of the single renewal date has enabled underwriters to pay closer attention to PII submissions, creating greater trust and loyalty between brokers and their clients.

According to the Law Society's annual 2016-17 PII survey, almost three-quarters of firms remained with the same insurer they used in the previous renewal round. The research highlights that 70% of practices opted for 12 month PII policies which represents an increase of 11% on the proportion of practices choosing 12 month policies in last year's survey.

In addition, although firms now have the flexibility to renew their policies all year round, over three-quarters of practices elected to renew their PII in the traditional month of October.

Given the relative stability of the PII market, solicitors can be forgiven for thinking 'if it isn't broken, why fix it?' However, the emerging elephant in the room in the form of cybercrime should prompt law firms to ask whether they have the right level of cover and support in place from their provider to fulfil all of their financial needs?

The Law Society's findings reveal that over a quarter of firms admitted that they had been targeted by hackers within the last 12 months, with spam attacks and phishing the most common attempted scams. Disconcertingly, a recent report released by the SRA also claims that law firms reported a record number of cyberthefts in the first quarter of 2017 that led to losses of £3.2 million.

The frequency and scale of data security breaches, often referred to as 'Friday afternoon scams', are gathering pace. In June, global law firm DLA Piper fell victim to a cyberattack which caused disruption to its IT network for ten days. The resulting direct and indirect costs could run into the millions, according to legal experts.

More law firms are seeking to take proactive measures to prevent sensitive financial data and client information from falling into the wrong hands. 34 per cent of respondents in the Law Society's PII survey claimed they have updated their IT security systems in direct response to experiencing a scam.

Asset finance solutions from specialist providers, such as Wesleyan Bank, enable businesses to spread the cost of investing in modern security technology to avoid placing a strain on their cash flow by paying for new software, hardware and implantation costs upfront.

Flexible payment over time solutions also cover associated staff training services around risk management and penetration testing to help keep hackers at bay, helping to ensure a firm's average PII premium costs remain lower.

Increasingly, law firms are taking out separate cyber insurance policies to ensure they are covered for instances including data rectification and breach notification costs to their clients, as well as public relation consultancy expenses. Experienced and trusted PII providers, such as Wesleyan, have specific cyber insurance policies covering loss in the event of a data breach and premiums for these insurances can be paid for over time using finance.

While most firm's renewal costs may look very similar this year, firms should be mindful that the PII landscape could look very different in 12 months time. Arguably, choosing an experienced financial provider who has a broad range of specific solutions that can cover almost any eventuality has never been more important.

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