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Reducing the risk - easing the indemnity insurance headache

Many legal firms will be taking a big sigh of relief at having eventually secured professional indemnity cover for the forthcoming year, even at a hefty hike in premium. However, there are also many firms who are still awaiting confirmation and who are on the edge of their seats hoping that either their insurer doesn't turn their application down, or worse still, decides to leave the professional indemnity market altogether.

The PI insurance market has seen some significant changes over the last few years. With the withdrawal of a number of companies and the threat of some insurers significantly cutting the amount of policies written (such as Zurich, who had a 13% market share in 2009), the market has become ever more concentrated. At the time of the 2009 renewal, five insurers had 61% of the PI market.

The price of insurance for those who do get it has also increased significantly, with premiums commonly increasing by 20% or more. For those with no other choice than the assigned risks pool (ARP), premiums can be up to 30% of turnover. This significant financial cost provides an opportunity for advisers to make a real contribution to the operational wellbeing of the firm and add real value at a commercial fee.