Decisions impacting on your Professional Indemnity insurance renewal should not be taken lightly. Any short term apparent benefits must be weighed up against potential longer term consequences. This is as true for the selection of your renewal date as it is of your selection of insurer. Two years on from the removal of the fixed 1st October renewal date, and an increasing number of firms are being offered the opportunity of an alternative renewal date. What should you do, if you are one of them?
Ultimately, if you change PII renewal date it must make sense for your business. There is no 'one-size fits all' answer. Before you make a final decision, seek advice from trusted advisors such as your accountants and PII broker.
A precautionary case study
Over the last 21 months, since the ability to change renewal date was allowed by the SRA in October 2013, we have seen far too many firms, especially the smaller firm, persuaded by their broker to move renewal date where the deal is 'great', gives certainty etc. But, is that really in the interests of your business in the medium term? For instance, one firm we came across had been persuaded to take a deal that gave them a renewal date of January 1st. Of course, insurance gets placed at the beginning of January but not many solicitors and even fewer smaller firms. It may well be that during the lead up to the renewal during the Christmas period, with not many other firms looking for terms, the available underwriters provide a good set of competitive terms but, surely the buying power of the legal profession is in its bulk. In current market conditions, Lockton believe that unless a firm has issues that affect its PI, for example claims, regulatory issues or perhaps a merger is on the cards, then smaller firms should stick to the main dates of October, March and April.
With almost 10,000 firms renewing on the main dates, this gives the profession bulk buying power and the attention of underwriters who will do little else for those periods. Multi-year deals, for example where if the terms of an agreement between your firm and the insurer are met then a second, pre-agreed year can be entered into, without the need for long proposal forms to be completed, have something to be said for them and should be carefully considered.
If we enter a 'hard market' as undoubtedly we will at some stage, where the supply of capital for insurance is restricted and rates rise, then the bulk buying power of the profession, especially for the smaller firm can again provide safety.
Take a decision that's right for you and your business, not the accountants or a lazy PI broker and give yourself the freedom to choose by helping to work in a well controlled risk environment, producing few problems for any insurer. There can be power deciding to move your renewal date but we think there's more power in numbers.