Solicitors secure premium benefits as professional indemnity market stabilises

The solicitors’ professional indemnity (PI) insurance could be described as one of the most turbulent lines of business in the country.

To an outsider, professionals arranging insurance for other professionals sounds like a simple – or even dry – affair.

But insuring law firms in recent years has been anything but simple. When the market hardened from around 2018, solicitors – and their brokers – struggled against limited capacity, insurers pulling out of the class at short notice and the failure of some unrated insurers.

For example, in January 2023, chartered accountant and business advisory firm Hazlewoods reported that 37 law firms had to close in the 12 months to 30 June 2022 due to the cost of PI insurance, with premiums representing between 5% and 20% of the average law firm’s expenses.

A further challenge is the bulk rush to renewal, with most law firms looking to do this around 1 April and 1 October every year.

So, what is the current state of the solicitors’ PI market as the legal sector approaches the all-important 1 April renewal date?

Stability for solicitors

Fortunately, the solicitors’ PI market has now stabilised, according to brokers currently arranging this cover – however, there are still plenty of difficulties to navigate.

Matthew MacLaren, professional risks director at Griffiths and Armour, told Insurance Times: “Lawyers’ PI is a large market. There have been a number of new entrants over the last six to 18 months.

“The existing participants also have greater appetites, so they are all invariably looking to build their portfolios, to be larger than they were two years ago and beyond.”

Konsileo client director Chris Cotterill added: “Solicitors can expect at least a 10% reduction [in their PI premiums] if there’s not much change to their business.

“But I would suggest that market exercises are undertaken as soon as possible. Too many brokers slap renewal forms everywhere and solicitors should be in front of an underwriter in a professional manner, to be taken seriously.”

There are 51 insurers writing solicitors’ PI in the 2024/25 indemnity period, according to the Solicitors Regulation Authority (SRA) – up from 45 in the year before.

A spokesperson for professional association The Law Society said: “The hard market has ended and there is increased capacity [for PI insurance] as new participating insurers have entered the market and they are competing with one another for well managed firms that appear to be a good risk.”

Premium dips

However, some brokers doubt that the headline figures about more insurers entering the PI market means that these underwriters are open to writing serious amounts of this business.

A broker that wished to remain anonymous told Insurance Times: “The reality is it’s quite a stable market – there aren’t that many insurers and brokers.

“If you’re buying today, you’re buying off the same guys you were buying off last year and predominantly through the same intermediaries.”

The largest insurers handling solicitors’ PI include Pen Underwriting, Inperio and Travelers, alongside schemes led by brokers including Paragon International Insurance Brokers and Marsh.

The softening market for insuring lawyers means premiums are staying stable or falling.

The Law Society spokesperson added: “The proportion of firms paying lower premiums in 2024 roughly doubled from the previous year, with around 5% seeing a fall in premiums.”

Mark Addis, managing director at Birchin Insurance Brokers, also noted this trend. He said: “The market is supportive of policyholders at the moment, who shouldn’t be paying more than they did last year.”

However, insuring solicitors remains an expensive business compared to arranging PI for most other professions, despite softening market conditions.

A typical law firm will pay PI premiums of 3% to 9% of annual turnover, according to 2023 SRA research, with the median amount being around 5%.

Around 20% of law firms, however, pay PI premiums of more than 10% of annual turnover a year, with 90% of this group being smaller legal practices.

By contrast, financial advisors typically pay between 2% and 6% of turnover for their equivalent cover.

MacLaren added: “Generally, I would say insurers are stickier now than they were some years ago [when] there were some fringe new entrants, some unrated capacity. With solicitors, insurers are attracted to [this demographic because of] the size of the market and the premium on offer.

“There were a few [insurers] that had to pull [out] quite rapidly [in the past, which] created a fraught time for legal practices that had chosen to place their cover with those insurers, usually based on price. That came back to bite them as they were not with a quality, stable, long-term insurer.”

Securing beneficial premiums

Challenges and capacity issues do still persist in solicitors’ PI, despite overall market conditions stabilising.

The Law Society spokesperson continued: “Despite the generally favourable conditions, smaller firms with turnovers below £1m and firms doing a large proportion of property work still face challenges in finding cover.

“However, we expect that most firms with an April renewal will benefit from the improved market for solicitors’ PI insurance.”

As it stands, brokers arranging solicitors’ PI cover in 2025 should be able to help their legal clients find well priced premiums without too many headaches about capacity.

But for non-standard risks, intermediaries will be putting in much more legwork – and proving the value of a good broker.