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The 2020 PII renewal round: some initial comments

7 July, 2020

Comments from CLC Director of Regulatory Standards, Simon Blandy.

At the beginning of the PII renewal round this year, I commented on the ongoing pressures on the commercial insurance sector.

At the time I said that these pressures would impact on PII renewal for CLC practices and noted that insurers had warned that pre-existing conditions in the insurance market meant that practices should expect an increase in premiums which may exceed 15%.

With all CLC Practices having had to renew their PII policies by 30 June 2020, I wanted to take this opportunity to provide a rapid review of the PII renewal round.

As we do every year, we will conduct a survey of practices to obtain insight from them. But in advance, I wanted to set out some early learnings from what has been a hard renewal round and begin to identify what some implications may be for CLC Practices.

Early feedback from practices and brokers is that where businesses have had problems gaining PII, this has been caused by:

  • the general hardening of the insurance market driving premiums up; and/or
  • the claims records of individual practices affecting the affordability of PII for them.

We, unfortunately, know this has meant that some businesses have had to close because they have been unable to secure renewal terms. The PII renewal period is often the point at which businesses who have been thinking of closing take the opportunity to do so. However, with the rise in premiums, there is no doubt that with four companies closing by the end of June 2020, this has been a difficult year.

Even before the outbreak of the coronavirus pandemic, the commercial insurance sector was not expected to start moving to profitability until the second half of 2021. So it is reasonable to assume that next year’s PII renewal period will not be any easier than this.

Given this, what can CLC practices be doing over the coming months to make sure they present themselves as a good risk to insurers.

Businesses should review their own claims record and decide the steps they need to take to avoid similar claims in the future. It is worthwhile reviewing the complaints received by the business to see what can be learnt about the type and subject matter of complaints. Insurers will be alert to types of claim (such as ground rent escalator claims) which have received coverage in the legal press. This may mean deciding not to take clients from particular sources or declining to take particular types of instruction. It is important to document these types of review and have them available when the PII proposal form is completed next year. They are useful evidence to insurers that the business is fully aware of the risks relating to the delivery of the legal services it provides and has taken appropriate mitigating action.