“Spring Clean” Your Claims Record
The “hardening” of the insurance market has been well publicised as insurers of solicitors’ PII have continued to incur significant losses – the result being underwriters hiking up premiums, increasing excess levels and generally being more selective as to the firms they wish to write.
For other professions insurers also have the option of reducing the scope of policy cover, but with the SRA’s Minimum Terms & Conditions there is little else that insurers can do. It is therefore down to the firms themselves to present their renewal application in the best possible light – and that includes your historic claims record.
It is extremely unusual that a law firm will not have incurred any claims or notified any circumstances within the period considered (usually between 5 and 10 years) and you should regularly review this record to ensure it reflects the latest position.
- Update all financial details of claims payments made as well as outstanding reserves to accurately reflect the current position. “Open” claims will generally have a build-up of defence costs and the quantum may also have been amended (up or down!).
- Take time to go through your files and provide updates to your insurers on the latest positions. It is almost inevitable that developments will have occurred since the initial notification – which could either increase the likelihood of a payment needing to be made by your insurers, or possibly showing signs of negotiation or an amicable settlement which would not make a call on your insurer’s chequebook.
- Mark up any claims or circumstances that have been closed. Insurers do not like to see a long tail of (sometimes unwarranted) open claims on your record – perhaps suggesting you have problematic clients or a laissez-faire approach yourself to seeking settlement. Insurer’s actuaries use claims analysis tools (called “triangulations”) which track how claims change over time. Closed claims would not be taken into account and so any false records with too many (unnecessary) open claims will skew this data evaluation – leading to a high premium being demanded.
- Have you had any large, one off claims? The cause of such a loss may be easier to comprehend by underwriters and can often be excluded from their triangulation calculations or “capped”. Plus, lessons are generally learnt from such instances with appropriate risk management strategies subsequently implemented, thus avoiding the probability of a re-occurrence.
- Have you had a high volume of smaller “attritional” losses? These are an annoyance to underwriters as they would expect a pro-active firm to identify the cause and internal systems amended to avoid repetition. Insurers may call for a risk management audit – which if you commence your renewal application too late may not provide you with sufficient time to finalise.
- Provide mitigating factors on any claims, especially if there have been trends, as insurers will want to see root causes have been identified and robust controls put in place to mitigate future occurrences.