Yes, a law firm’s turnover is one of the two key rating points an underwriter will take into account when calculating what premium to charge for a solicitors professional indemnity insurance policy. Underwriters tend to base premiums on a percentage of a law firm’s last completed revenue statement. If fees increase at future renewals, premiums are likely to go up. If they decrease, this may result in a premium reduction, depending on how insurers interpret the underlying reasons for any decrease in fee income.

The type of work undertaken by a law firm is one of the two key rating points an underwriter will take into account when calculating what premium to charge for a solicitors professional indemnity insurance policy. Underwriters will attribute a particular level of risk for the work done within each practice area. For example, commercial and residential conveyancing is consistently seen as the highest level of risk on underwriters’ risk matrices.

The impact of a claim on the cost of your solicitors professional indemnity insurance premium depends on the cost of that claim relative to the premium. The higher it is in proportion, the more likely the claim could trigger an increase in the cost of your solicitors professional indemnity insurance. A professional indemnity insurer will also consider the nature of the claim, whether the issue is a systemic one, and whether adequate risk management measures were in place prior to the claim. The more positive the insurer’s view, the less likely it is to have a significant negative impact on a law firm’s premiums.

To access most of the insurers who provide solicitors professional indemnity insurers, law firms will need to go through an insurance broker. Insurance brokers are authorised and regulated by the Financial Conduct Authority (FCA) and carry their own professional indemnity cover.

Different brokers offer different levels of service. A transactional insurance broker will simply place solicitors professional indemnity policies with insurers, whereas an advisory insurance broker will go further and offer independent professional advice and guidance.

When choosing an insurance broker, there are three key questions to ask:

• Is the broker a specialist in solicitors professional indemnity insurance (PII)?

• How many years’ experience does the broker (and its employees) have in placing solicitors PII?

• Which solicitors professional indemnity insurers can the broker access directly?

The cost of a solicitors PII policy will vary from law firm to law firm, as it is determined by the unique risk factors applicable to each practice.

There are five key areas that influence the premium level:

1. Which types of work the law firm undertakes

2. The firm’s gross fee income

3. The claims history of the law firm

4. Risk management practices within the law firm

5. The firm’s structure and location.

Between 1987 and 2000, The Law Society provided compulsory professional indemnity cover to all law firms in England and Wales. This was arranged through a mutual known as the Solicitors Indemnity Fund (SIF) which was managed by the Solicitors Indemnity Fund Limited (SIFL). From 1 September 2000, law firms opted to move to an open-market scheme. This gave law firms greater choice and encouraged competition between solicitors professional indemnity insurers.

Since 2000, SIF has remained liable for providing expired run-off cover, also known as post six-year run-off cover (PSYROC) to law firms whose six-year run-off policy has elapsed. How long this arrangement will persist is uncertain. However, following a recent consultation by the Solicitors Regulatory Authority (SRA), it would appear that it will stay in force until at least September 2023 to allow full consideration of the points raised in the consultation feedback.

All law firms in England and Wales are authorised and regulated by the Solicitors Regulatory Authority (SRA). It is mandatory for all law firms to purchase solicitors professional indemnity insurance to ensure that their clients are adequately protected from civil liability claims.

It is common practice to use an insurance broker, as brokers have access to multiple solicitors professional indemnity insurers and can provide specialist guidance and insight on solicitors PII. Each insurer will have its own requirements, with some preferring to insure sole practitioners and others targeting top-200 law firms.

Solicitors professional indemnity insurance covers claims made against law firms in respect of financial losses resulting from negligence, error or omission in law firms’ provision of professional advice or legal services. As trusted advisors to many law firms, we encourage you to focus on your internal risk management processes and procedures. Your solicitors PII policy is there to protect and defend you from spurious claims.

The mandatory minimum professional indemnity cover limit for law firms is either £2 million or £3 million. The intended status of your law firm will determine whether you require a minimum £2 million or £3 million limit of indemnity cover. A £2 million limit is required for all sole practitioners and partnerships. For limited and LLP entities, the limit is £3 million. It is common practice for for law firms to purchase limits of indemnity above the minimums specified by the SRA.

Solicitors professional indemnity insurance is a complex insurance product. Given that claims can arise long after the policy was written, the cost of professional indemnity insurance will vary significantly from law firm to law firm. There are multiple factors that could impact cost. But, in simplistic terms, the two biggest drivers will be your activity profile and your fee income, i.e. what kind of work your firm does, and how much of it.