Your PI policy is not a tin of beans: Five things every law firm should know before renewal

It is tempting to assume that a single large claim is the thing that will alarm your insurer. In practice, it is the opposite. What underwriters watch most closely is the frequency of notifications. A firm that notifies three or four matters a year out of an abundance of caution - and those matters resolve within twelve months - is a firm that insurers want to keep. A firm where notifications develop, linger, and eventually result in payments, even modest ones, sends a very different signal. The underwriter's logic is straightforward: if you are generating a steady stream of small losses, it is only a matter of time before a significant one arrives and wipes out years of premium income.

In 2026 alone, we have already seen 18 firms fined for procedural AML breaches, 16 of which were CQS firms. I have been asking a simple question: where were the compliance officers? In each of those firms there would typically be a COLP, COFA, MLRO, MLCO, someone performing the independent audit function, and the partners themselves. If a firm also holds CQS and Lexcel accreditation, add a senior responsible officer to that list. Yet all of these roles appear to have been missing in action.

Jon confirmed what many of us suspected: insurers understand this. They know that a sanction does not tell the whole story, and experienced underwriters will dig beneath the surface. But make no mistake - it affects the risk assessment, it can affect the premium, and in serious cases it can lead to non-renewal.

What is particularly concerning is the duration of non-compliance. My research shows that many of these firms had been non-compliant for six to eight years on average. I found one firm that had been non-compliant for fifteen years. The question that follows is an uncomfortable one: were the appropriate notifications being made to insurers during that time?

The SRA minimum terms and conditions create one of the widest professional indemnity policy wordings in the UK insurance market. Insurers cannot decline a claim unless there is fraud and collusion. Many firms take comfort from that. Too much comfort.

What is less well understood are the housekeeping rules embedded within the policy. There is, for example, a condition requiring firms to act with reasonable care and professionalism in the management of their business. Jon gave a telling example from the era of Friday afternoon frauds, where cashiers were socially engineered into releasing funds. The insurer invoked the reasonable care condition. The claims were ultimately paid, but the firm spent months in limbo, having to reserve the exposure in its accounts and report the uncertainty to its partners at every board meeting.

The same principle applies to late notification of circumstances. If something happens in your firm that might give rise to a claim, you try to resolve it internally, your broker then moves you to a new insurer, and six months later it becomes a full-blown claim, you have a problem. Both insurers will eventually sort out who pays, but the intervening period is deeply uncomfortable and entirely avoidable.

The action by Travellers against the SRA, and the separate claim by an Axiom Ince client against both Travellers and the SRA as joint defendants, should be on every firm's radar - not because the facts are likely to be replicated, but because of the principle at stake.

There is an aggregation clause in solicitors' PI policies that allows an insurer to gather together multiple losses arising from the same originating cause and treat them as a single claim. If you are a conveyancer handling high-volume plot sales, or a litigator running the same type of claim repeatedly, and a systematic failure occurs in your processes, the aggregation clause could dramatically reduce the effective cover available to you.

This is not scaremongering. It is an invitation to think about where your concentrated risks lie and whether your management controls are adequate to address them.

Jon's final message was the one that resonated most strongly with me. Only around one per cent of law firms take the time to meet their insurer. That statistic is extraordinary when you consider what is at stake.

Your PI policy is a promise to pay a sum of money at some point in the future if something goes catastrophically wrong. It exists to protect partners' and directors' livelihoods, their homes, their staff, and their clients. Yet too many firms treat renewal as filling in a proposal form, sending it to a broker, and accepting whatever comes back.

Here is what you should be doing instead. Ask your broker to show you the terms that come back from insurers - including any declinatures. Set out clear tender requirements: timelines, minimum lead times before the renewal date, and which insurers you want approached. Ask about the scope of coverage and understand the housekeeping rules. And if your broker resists any of this, ask yourself why.

Jon and I both made the same point from different angles: the firms that build genuine relationships with their brokers and insurers - that pick up the phone regularly, notify early, and communicate openly - are the firms that get the best outcomes when it matters most. No surprises at renewal. No reservation of rights when a claim arises. No awkward conversations at the partners' meeting.

We also discussed the growing consultant solicitor model. The larger consultancy firms have invested in technology that allows real-time oversight of a consultant's work - onboarding, identity checks, procedural compliance, file quality. But smaller firms operating a hybrid model of employed fee earners and consultants do not always have the same level of infrastructure.

Jon raised a point that deserves wider attention: the risks in the consultant model are not purely procedural. If a sole operator is working from home and experiencing personal difficulties, that is where the human risk lies and it is the hardest thing for any firm to detect remotely.

There is also the contractual question. Some consultant agreements require the consultant to pay the excess on any claim arising from their work. Not every consultant reads their contract carefully enough to understand that exposure. If you are a consultant solicitor, check your agreement. If you are a firm engaging consultants, make sure the arrangements are transparent.

The full recording of this session with Jon Cook is available on demand. If your PI renewal is approaching, I would strongly recommend watching it in full - there is practical detail in the conversation that goes well beyond what I have been able to cover here.

If you have questions arising from the webinar, you are welcome to email me directly and I will liaise with Jon as appropriate.