Solicitor and Law Firm Insurance | Quotes, Costs, Requirements

Professional indemnity insurance (PI) is indicated for all businesses and professionals selling their expertise to clients. If you give advice as part of your job, you probably need PI. Law firms are generally required to have PI insurance as a condition of their authorisation with the SRA. As a practising solicitor, PI insurance protects you in the event of a claim for damages or compensation made by your client, or a third party, arising from the legal services you have provided.

Table of Contents

• What does solicitors professional indemnity insurance cover?
• Do solicitors need insurance?
• How to choose Professional Indemnity Insurance for a solicitor or law firm
  • How to get professional indemnity insurance through a broker
  • How to choose the right PI insurer
• How much does solicitors professional indemnity insurance cost?
  • Why is professional indemnity insurance for solicitors so expensive?
• Professional indemnity insurance for solicitors quotes
• PI claims examples for law firms
• List of participating PI insurers from SRA

What does solicitors professional indemnity insurance cover?

Solicitors professional indemnity insurance covers civil liability claims, usually professional negligence, in private legal practice. PI also protects you in the event that a theft takes place if, for example, cyber criminals steal money from your client’s account.

Your insurer will pay the amount awarded to your client, as well as their legal costs, after your ‘excess’—the amount you pay towards a claim agreed in your policy. Your insurer will also pay your costs incurred in defending the claim. It is critical to notify your insurer straight away if a claim is made against your firm, or if you have grounds to believe the probability of a claim looms on the horizon.

Do solicitors need insurance?

Yes, solicitors need insurance if they are working (and for years after they retire or change careers—see run-off insurance). If you are a sole trader starting out your own company, or have a 2-3 partner firm, you may find the task of choosing and paying for PI to be quite onerous. However, PI cover is essential for solicitors and your firm cannot operate without one. Firstly, litigation is on the rise, making it more important than ever to be protected. Secondly, solicitors are obliged by the Solicitors Regulation Authority (SRA) to be insured as a condition of membership. And thirdly, your clients will expect you to be insured.

For more information on insurance requirements after a solicitor stops trading, see our article 'Do solicitors need run-off PI insurance?'

How to choose Professional Indemnity Insurance for a solicitor or law firm

You have the option to buy directly from the insurer, but a significant number of services are available only through brokers, so going direct will restrict your choice. If you decide to use a broker, they must be registered with the Financial Conduct Authority (FCA). A good, experienced broker with extensive market knowledge can help you tackle the complexity of PI insurance.

This is especially important since a broker will also share your responsibility for ensuring any policy is compliant with the SRA minimum terms and conditions (MTC), which must be complied with. This is in contrast to a direct insurer, who may have several policy wordings suitable for legal professions, not all of which are compliant with SRA MTCs.

How to get professional indemnity insurance through a broker

It is common, particularly for smaller law firms, to use multiple brokers in order to have access to the whole insurance market. Speak to your broker and ask which insurers they have direct access to. When using multiple brokers, it is important to tell them which insurers to approach, so that an insurer does not receive your proposal from more than one broker. With the current hard professional indemnity market this is more important than ever, as insurers are down-prioritising any clients they see multiple submissions from.

If your broker does not have access to the entire insurance market, it may be necessary to instruct other brokers on an execution-only basis to access the full market.

Brokers can be either advisory or work on an execution-basis only. Advisory brokers assist you in submitting the best possible proposal to the insurance company, so that you have the best chance to get the cover you need at the lowest possible rate. A proposal form is a number of documents that demonstrate that your firm is a good risk to insurers.

Advisory brokers give you information about current conditions in the market, and whether you need to make changes to your business so that your proposal is properly completed for the insurance company and the underwriter. Your advisory broker has a duty to offer you independent, transparent advice about the market, and work in your best interests at all times. In addition, if a claim is made against you, your broker should support you through the process.

How to choose the right PI insurer

Your broker will help you find the PI policy that best suits your firm’s needs. You may prioritise: pricing, excess, limit, financial rating, reputation, etc. For example, the insurance provider’s financial rating is a crucial factor to consider, since it indicates their ability to pay in the event that you need to make a claim. Limit is the limit the insurer will pay under a given PI policy during the period that the policy is valid.

You will need to buy a PI policy from an insurer that has signed the SRA’s Participating Insurer’s Agreement. We have included a list list below that was correct at the time of writing but as the list is updated annually you might also want to check the official list at the SRA here.

How much does solicitors professional indemnity insurance cost?

The cost of professional indemnity insurance for a solicitor is typically calculated as a percentage of fee income, which can range from 1% to 6% or more. The percentage will vary depending on factors like the riskiness of the work done and the history of previous claims. But even a small law firm will likely need to pay at least £3,000 for PI cover.

PI constitutes one of the major expenses for many law firms. Since the Covid 19 pandemic struck, insurers have risen their premiums and this has impacted smaller firms. Although it may be tempting to focus on pricing, it is really important to be selective and choose the right PI policy for your firm, as this will be one of the most critical decisions you will make for your business. It is a complex market, and it pays off to do as much research as possible beforehand. This includes looking out for the most up-to-date changes in the market, for example the inclusion of a cyber security clause.

Be especially careful with sublimits and special excesses when comparing insurance quotations. If a policy quote is significantly lower priced than another, it’s likely that some areas of coverage have been reduced or otherwise limited, so it is worth asking brokers and insurers to compare your best two quotes to see how they differ and ensure that you can make an informed decision. Right now with the hard market, insurers can only really compete on price by chopping up the policy and reducing their risk in material ways.

What factors affect premiums of Professional Indemnity Insurance for Solicitors?

Underwriters will look at a solicitor’s revenue and turnover, the number of partners working for it, the type of legal services it offers, its claims history, and other factors. The underwriter will use these factors to assess whether you are a good risk to the insurance company.

At times when the insurance market is less competitive, it can be harder for sole traders or smaller firms with fewer than five partners to get insurance.

It is important to present a good proposal that demonstrates that your firm’s procedures and working practices reduce the risk of mistakes that could lead to claims. A clean claim record also helps, although if you have had claims make sure to include how your procedures have changed to prevent the same thing happening again. It also depends on the type of legal services you offer.

Some legal services present greater risk than others. Conveyancing, for instance, attracts the most claims, so if your firm’s income is generated mainly from conveyancing, you will pay more. Generally speaking, non-litigious work such as debt collection or immigration law attracts lower premiums. Employment services stand at the middle of the scale, whereas commercial litigation and property management, at the higher end of the scale, attract the highest insurer premiums.

Professional indemnity insurance for solicitors quotes

Solicitors can get quotes from direct insurers or through a broker, or start the process via a comparison engine (e.g. using the blue button below) to connect with multiple insurance providers. The PII market for solicitors is highly specialised. There is a limited number of underwriters in the marketplace and you need a broker to access many of them. Brokers can be very useful for helping you answer important questions like 'How much professional indemnity insurance do I need?'

The SRA expects solicitors to be insured for a minimum of £2 million, sometimes more in the case of larger firms. Of course, you can buy more cover if required, and nowadays firms are expected to assess their own needs based on the type of work they do, as well as other factors. You must pay attention to the renewal cycle (usually on October 1st, although it is possible to renew your policy throughout the year) in order to be covered all year round. Once your current policy expires, you have a limited time period to renew your PI policy, or your firm will have to close.

If you don't have a broker or want to compare prices with another broker, click here, where you'll fill out a short form with our comparison partner QuoteZone to be connected with insurance providers who can hopefully help you get the cover you need at the right price.

Examples of claims for Professional Indemnity Insurance in law firms

PI claims usually arise when the client of a law firm or solicitor alleges a failure on their part to carry out their duty to a reasonable standard. If this failure results in loss (financial, reputational) for the client, they may try to gain compensation from their solicitor. PI will ideally meet the costs of any compensation you pay to the claimant and any legal costs incurred defending the claim.

Examples of this include:

FAQs

Other types of insurance for solicitors and law firms

List of participating insurers from SRA

SRA Participating Insurers Solicitors Regulation Authority