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Key factors which could affect your firm’s PII premium

Key factors which could affect your firm’s PII premium

Obtaining professional indemnity insurance (PII) is one of the major overheads for all law firms. Recently the PII landscape has seen a high churn rate of insurers entering and exiting the market and this trend, combined with an increase in claims frequency, has pushed PII premiums up.

PII provides security and financial support for firms when they most need it while ensuring important public interest protection for civil liability claims. Firms trading without adequate insurance cover in place can be prevented from trading, or even closed down.

The following considerations are most likely to influence the cost of PII and may compromise your firm's ability to obtain appropriate PII cover in the future.

Cyber frauds and data breaches

According to the Solicitors Regulation Authority (SRA), in the first six months of 2019 law firms reported a loss of £731,250 of client money as a direct result of being impacted by cybercrime. The most common types of activity are:


  • Email modification fraud - where a criminal intercepts and manipulates emails between a client and their firm in attempt to access their bank details
  • Phishing and vishing - email scams or attempted deception over the telephone to obtain confidential information from an unsuspecting law firm employee or solicitor
  • Malware and ransomware - malicious software which can encrypt files and bring firms to a standstill, resulting in cybercriminals demanding a ransom fee to unlock compromised IT networks


Considering the amount of personal data and client data often held by a business, it is imperative that law firms take proactive measures to prevent cybercrime. Practices lacking robust IT security and back-office systems are particularly susceptible to unscrupulous activity and could see their PII premium and run-off cover notably increase if they fall victim.

Investing in modern technology and introducing risk management measures, such as electronic funds transfer policies and IT penetration testing, can keep criminals at bay from accessing sensitive client information to ensure average PII premium costs aren't pushed up through falling victim to cybercrime.

Take cover with separate cyber insurance

Just under a third (32%) of UK businesses admitted they had experienced a cyber security breach in the last 12 months, according to the Department for Digital, Culture, Media and Sport. To mitigate the financial impact from cybercrime, law firms should consider taking out separate cyber insurance policies to supplement their PII cover as this may lower PII premiums.

Cyber insurance covers your costs and losses if you experience a data breach or cyber attack. This can extend to data rectification and associated breach notification costs to clients, as well as public relation consultancy expenses. It's imperative though to carefully read the small print and speak to insurance providers before taking out a cyber insurance policy. Firms operating legacy systems, or servers and applications that are no longer supported, may be excluded from some policies.

Risky business

A firm's area of expertise can affect the cost of PII and dissuade some insurers from offering insurance at all. High risk areas include conveyancing, personal injury and wills and probate. In January, the SRA announced new proposals to reduce the single claim limit within the SRA Compensation Fund to £500,000 from £2 million. The fund provides an extra safety net to firms who need the most protection in areas that PII is unable to cover.

However, growing risks and escalating demands for compensation from wronged clients has prompted the SRA to seek to end multi-million payouts through the compensation fund. The SRA's annual review for 2017/18, published in May 2019, highlighted that £18.1m was paid to law firm clients during that year, up 19% on the previous year and the highest figure recorded since 2013/14. Costing £5.3m, probate losses are the most common factor behind a compensation fund payment, whilst conveyancing fraud cost the fund £3.7m.

Unsurprisingly, the increase in both claims frequency and severity has prompted PII insurers to review their portfolio and risk exposures in greater detail. Firms experiencing claims from both residential and commercial conveyancing work, cybersecurity and probate are likely to see their PII premiums significantly rise.

Claims history

PII insurers evaluate a practice's claims record over the past five to ten years as a likely barometer of future incidents. Unsurprisingly, the frequency and size of previous claims are taken into account and have a major bearing on a firm's premium.

To reduce the possibility of being refused PII cover, solicitors should maintain a comprehensive record of their firm's claims history in addition to the participating insurer's claims summary. As well as documenting what happened and why, it's equally important to evidence what procedures have been put in place to minimise the chances of a similar incident from occurring again.

Failure to disclose negative information that is visible online, or discrepancies between activities listed on a firm's website and those in the Law Society's listings, may also see insurers decline to cover.

Choosing the right level of PII cover can be something of a minefield for law firms who can be adversely impacted emotionally and financially by a civil liability claim. It's important that you choose an experienced and reputable participating insurer who understands the legal profession's specific challenges.

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