My PII premium has rocketed and I don’t know what to do – help!
in Advice

My PII premium has rocketed and I don’t know what to do – help!

It is that time of year again when firms are getting their insurance premiums through and discovering that their quotes have shot up because of factors around the property market. This means that a number of firms are in the unenviable position of finding themselves without any cover in a week’s time and wondering what on earth to do.

Cash Conveyancing

I have taken two calls today from senior partners of small law firms that have an element of conveyancing work going on but not mortgage-backed, and it seems that the insurance companies are targeting these types of law firms and pushing their insurance up to levels that are so high it is an affordable.

Since dictating this article I have come across a further couple of firms in the same position. One firm had undertaken a very small piece of conveyancing some time ago and another had closed their conveyancing department down but still had a large increase in their PII.

I suspect this relates to the fact that if a law firm is not doing conveyancing for mortgage clients they don’t tend to have the CQS accreditation. Firms who just do conveyancing for cash buyers are finding themselves squeezed out of the market.. Although one of the brokers has said it is just down to the increased caseload in the conveyancing market generally and hence the increased risk of claims.

One of the solicitors who contacted me dealt solely with high net worth Middle Eastern clients buying in London for cash and without mortgages, which means that the conveyancing work he is doing has resulted in high premiums at unaffordable prices for his size of firm.

So what can you do about high premiums that are making your firm unprofitable if you carry on.How do you deal with getting insurance in the next week in order to carry on trading and what options do you have?

Get in touch

The answer to this is to get in touch with us because there are things that you can be considering. It is not the end of the world and the end of your business, but you are probably going to have to think outside the box.

Check your policy carefully

Firstly you need to speak to your insurers to check how long you have got once your insurance expires. Check your policy terms as well – we have come across solicitors being given very misleading advice by their brokers – eg they have to take out insurance prior to the deadline or agree to close and pay their run off cover at the old rate or they will be faced with paying run off cover at the new premium level.

Our understanding is that there is usually a grace period of either 4 or 12 weeks to enable you to find alternative arrangements. This should give you time to consider your options, which means that you don’t need to panic into making a decision immediately.

Full Report

Secondly get in touch with us and let us put together a full report for you on the value of your firm, your options for sale and likelihood of sale. You can use our Gold Service as a seller or you can commission a one-off valuation and structure report. This will give you a very good idea as to what you can be looking for and how you can deal with this situation.

Seek a Merger or Sell as a Shell

Find a practice to merge with, they become the successor practice, which means that you do not need to pay run off cover. Alternatively look for a practice you can take yourself and your clients to as either an employee or a consultant. Look around for someone to buy your firm as a shell law firm and take it over without the clients. Finally keep looking at the PII market.

Summary

If you find yourself in this position without professional indemnity insurance because the price is too high and too painful to consider, firstly do not panic – find out exactly what time frames you will need to work to (and read the contract/policy carefully) and then consider your options carefully.