At the 2013 renewal, solicitors were no longer tied to a 1st October renewal date for their Professional Indemnity insurance. This followed pressure from some in the profession who wanted to move away from what they saw as the 'mass scramble' for insurance during August and September - often not at a time that suited the law firms.
Yet, statistics from the SRA earlier this year indicate that fewer than 5% of firms (433) in fact elected to move their renewal date - of which 274 were Travelers clients who offered many clients a 17 month policy.
We have some clients who were very keen to move to an alternative renewal date, and other's who would much rather stay with their existing arrangements. At the moment, there is not a clear 'one best way' - and the arguments are finely balanced.
Arguments in favour of moving your policy date
- the summer holiday season coincides with proposal form completion, and makes it very difficult to obtain the relevant information timeously
- your firm's financial year end falls around the same time as renewal (there's just too much pressure, and you may find it difficult to provide final figures for the year)
- Your firm's financial year end falls after renewal (and you find it difficult to provide meaningful financial results for the current financial year)
- You want to align your renewal and financial year end dates - you've got the resource to manage both at once, and you prefer it for budgetting purposes.
- You believe that your firm will get more detailed, individual consideration from underwriters outside of the rush to 1st October (this will be likely to benefit larger practices, or niche players more than small-mid-sized 'high street' practices).
Arguments in favour of retaining a 1st October renewal date
- You are set up for the 1st October process, and it works for you.
- You specifically don't want to tie in your financial year end to your renewal (for many firms, it works best for the financial year end to fall around 3-4 months ahead of the renewal date)
- The majority of insurers are still set up for 1st October. Moving to an alternative date that suits your existing insurer may not suit alternative markets so well, and leave you in a weaker negotiating position in future (this may be truer of smaller firms, or those with a more difficult claims record).
Soft & Hard markets
In a soft market, the strong competition amongst insurers that comes with a single renewal date can help keep premiums lower.
In a hard market, when there is little market appetite/capacity, the single renewal date can put more pressure on firms to accept whatever is quoted, with little competition. This is rarely true of larger firms with minimal claims on their record, who have tended to acheive good rates, even in hard markets such as 2002 and 2005.
The feeling is that, after a much harder market for many firms last year, 2014 may be something of an easier year for some firms. While some of the more established insurers are likely to try to push through rate increases on the back of a deteriorating claims picture, the newer entrants to the market will keep a downward pressure on premiums.
Alternatives to changing renewal date
If you are a 'high risk' practice on the face of it (particularly in terms of work type) and you can really put together a convincing presentation to insurers demonstrating that your practice has a much better risk profile than might at first glance appear, there could be incentives to move to a non 1st October renewal, to be sure that your risk is considered more fully. An alternative, is to submit your completed proposal forms early in the renewal cycle, before insurers are over-run with submissions or have met their premium/market share targets. This is one reason we encourage firms to plan ahead for renewal, and submit their proposal forms in late July ideally.
How Lockton can help
Speak to your Lockton Account Executive if you have any concerns about your renewal this year. They will help advise you on whether 1st October is right for you, or whether you might benefit from a change of renewal date. We can also provide a range of practical guidance to help you make the best possible renewal submission.