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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 much does solicitors professional indemnity insurance cost?
- 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.
- Largest fee income
- Type of legal services offered
- Claims history
- Years in business
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.
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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:
- Missing time limits (a missed court deadline)
- Incorrect advice (advising outside areas of expertise)
- Breach of confidentiality (identifying the client, cyber losses and data breaches)
- Professional negligence (failure to record instructions and advice given, failure to record the scope of the retainer).
- Property conveyancing. For instance, if there is a failure to identify restrictive covenants on a property. The claimant may purchase a residential property through a solicitor and later accuse the solicitor of failing to spot something (for instance, historical buildings or land usage which make remortgaging or resale impossible). This can result in a claim worth hundreds of thousands of pounds, to compensate for alleged losses.
- A solicitor misses a court deadline. In this situation, a good PI insurance cover can help the solicitor seek advice on the likelihood of an appeal, with its associated costs. This means that the solicitor can develop a damage limitation strategy, in order to mitigate the mistake and to retain the client.
- ‘Friday afternoon’ frauds are the most common type of cyber crime affecting law firms. Most property transactions are completed on a Friday afternoon, hence the name. This type of fraud involves cyber criminals intercepting emails between solicitors and their clients, accessing sensitive information such as bank account details in order to divert funds into their own accounts. In this situation, the solicitor should notify their insurer as soon as possible after contacting the police. This way, the insurance company will be able to offer advice on what steps to take to minimise or recover the loss.
Yes, although even if exempt from SRA requirements anyone who provides professional services or advice can be claimed against in the event that their services have cost a third party, through negligence or breach of civil liability. So whilst it’s possible to advise without PI insurance in place in some cases, it is not recommended.
There are a few cases where indemnity insurance is not needed by individual solicitors, most notably when providing services to:
- Work colleagues
- Organisations or partnerships that your employer has an interest in, or is a member of
- Members of associations you work for
- Insurers or local government
- The Crown, non-departmental public bodies, and the Legal Services Commission
- Regulatory bodies
It is important to note that, as with the previous question, the lack of a requirement for cover does not mean you are necessarily exempt from a claim. Check whether any other policies you or your employer hold can extend to cover you for the above examples, or whether it is possible to obtain cover specifically for these activities.
If you operate under the umbrella of a larger consultancy firm you will only need to be covered under their insurance policy. As a sole practitioner/freelancer you would need to obtain your own professional indemnity insurance.
Not in their own name, however their employer has a responsibility to ensure that they are covered on the overall business insurance policy. This does not need to be an SRA compliant policy unless the company itself is subject to SRA regulation.
Professional Indemnity policies insure whoever is named as the cover holder on the documentation. Therefore if you are working for a firm as an employee, you are covered as long as the legal name of the firm is shown on the documentation. If you are an individual the same applies if your name is listed as the insured.
It is possible to add ‘additional insureds’ to professional indemnity policies, where companies or individuals are listed by name as being afforded the same cover level as the main policyholder. It is also possible to obtain policies for partnerships where the cover holder is shown as a list of the names of the partners in the partnership, with anyone acting on behalf of these principals being covered by policy clause.
Other types of insurance for solicitors and law firms
|Common Types of Law Firm Insurance & What They Cover|
|1.||Professional Indemnity||Protection in the event a business feels your advice or guidance caused them to lose money.|
|2.||Public Liability||Coverage in the event you cause property damage or injury while working.|
|3.||Employers’ Liability||A legal requirement in the UK if you hire any staff, even part-time employees or other contractors.|
|4.||Cyber Security||Will cover expensive legal bills/compensation if you’re the victim of a cyber attack/leak and found at fault.|
|5.||Buildings and/or Contents and Business Equipment||Insures a building against damage if you own it; insures office furniture and furnishings; insures business equipment like laptops, devices, etc. in the event they’re stolen, lost, damaged in a covered event.|
List of participating insurers from SRA
SRA Participating Insurers Solicitors Regulation Authority
|Solicitor & Law Firm Insurance Companies||Rating Agency||Credit Rating||How to Get Quotes|
|A M Trust Europe Limited||A M Best||A-||[via a broker only]|
|Accredited Insurance (Europe) Limited - UK Branch Office||A M Best||A-||[via a broker only]|
|Aegis Managing Agency Limited||Standard & Poors||A+||[via a broker only]|
|AIG Europe S.A||Standard & Poors||A+||[via a broker only]|
|Allianz Global Corporate & Specialty SE||Standard & Poors||AA-|
|American International Group UK Limited||Standard & Poors||A+||[via a broker only]|
|Aspen Insurance UK Limited||A M Best||A||[via a broker only]|
|Atrium Underwriters Limited||Standard & Poors||A+|
|Aviva Insurance Limited||Standard & Poors||AA-||[via a broker only]|
|AXA XL - Syndicate XLC 2003 at Lloyds||Standard & Poors||A+||[via a broker only]|
|AXA XL - XL Insurance Company SE||Standard & Poors||AA-||[via a broker only]|
|AXA XL - XL Insurance Company UK Limited||Standard & Poors||AA-||[via a broker only]|
|Axis Specialty Europe SE||Standard & Poors||A+||[via a broker only]|
|CMA Ltd||Standard & Poors||A+ (Strong)|
|Everest Syndicate 2786||A M Best||A+||[via a broker only]|
|Great Lakes Insurance SE UK Branch||A M Best||A+|
|Hamilton Insurance DAC||A.M Best||A -||[via a broker only]|
|Hamilton Managing Agency S.A HAM 5376||A.M Best||A||[via a broker only]|
|Hamilton Managing Agency Syndicate 4000||A.M Best||A||[via a broker only]|
|HDI Global Specialty SE-UK||A.M Best||A||[via a broker only]|
|Legal and Professional Insurance trading name of Liberty Mutual Insurance Europe SE||Standard & Poors||A||[via a broker only]|
|Pen Underwriting Ltd on behalf of International General Insurance Company (UK) Ltd||Standard & Poors||A-||[via a broker only]|
|QBE Europe SA/NV||A M Best||A||[via a broker only]|
|QBE UK Ltd||A M Best||A||[via a broker only]|
|QBE Underwriting Limited for QBE UK Ltd Syndicate 1886||A M Best||A||[via a broker only]|
|QBE Underwriting Limited for QBE UK Ltd Syndicate 386||A M Best||A||[via a broker only]|
|QBE Underwriting Limited for QBE UK Ltd Syndicate 5334||A M Best||A||[via a broker only]|
|QBE Underwriting Limited for QBE UK Ltd Syndicate 5386||A M Best||A||[via a broker only]|
|Sompo International||[via a broker only]|
|Starr Companies (Managing Agents Limited) (CVS1919)||[via a broker only]|
|Starr Companies (Starr Europe Insurance Limited)||A M Best||A||[via a broker only]|
|Starr Companies (Starr International (Europe) Limited)||A M Best||A||[via a broker only]|
|Travelers Insurance Company Limited||Standard & Poors||AA|
|Travelers Insurance DAC||Standard & Poors||AA|
|W R B Underwriting||Standard & Poors||A+||[via a broker only]|
|Zurich Insurance Plc - UK Branch||A.M Best||A+||[via a broker only]|