Meet the team - Mike Mortlock

06 February 2019

Interview with Mike Mortlock, Partner at JLT Specialty who is one of the senior managers in our Professional Indemnity practice and Legal Practices Group.

I have been involved with the placement of professional indemnity insurance since 1986, originally for all professional service firms, eventually specialising in the legal services sector by the mid 90’s.

The vast majority of firms I look after will feature in the Lawyer UK 200, but I also have a number of clients who you would describe as larger city and high street practices.

When assessing the appropriate level of premium the basic key factors considered are the fee income, the areas of practice the firm undertakes and, of course, the claims experience.  This provides the base premium, then insurers will review the information provided on how the firm manages risk for their final assessment. For this reason it is worth spending time on your presentation to insurers to cover these areas as for some firms it can make a significant difference in the premium negotiated.

Our role as brokers is to work closely with our clients to advise how best to present their business to insurers. This presentation is essential as it provides key information over and above any questions found in a proposal form and is an opportunity to demonstrate to insurers that you run your business with the proper controls in place to minimise risk and reduce the likelihood of claims.

In my personal view, the ideal presentation will cover topics such as the financial performance and growth strategy of the firm, the core business and typical client base – for example, is this a local business or do you accept national or international business? – and it is always important to provide an overview of your current claims position.  This should include a commentary on any paid or larger outstanding claims and whether these notifications have led to any procedural changes.  Basically the more information you can provide on the operation and risk controls within your business the more discretion insurers will have on their pricing.  

Each insurer has individual areas of work that are deemed by them to be higher risk than other areas; this is generally based on the insurers own historical claims experience.  That said most insurers do have a consensus that the main areas of work which carry the highest risk are commercial work for the potential value of the claims and property work mainly residential conveyancing for the frequency of claims. Firms involved in this area of work need to provide as much information on how they manage risk and how the firm ensures that a quality service is delivered to clients.  Insurers will need this in order to offer a well-considered premium.

The current market is definitely showing signs of changing, but not necessarily just on the primary layer of insurance.  That said I think we are approaching a period where insurers will be looking for a pro rata increases in line with any fee growth perhaps with a very slight increase in the premium rate charged.  The harder layer to predict is the layer of insurance sitting immediately above the mandatory cover which for years has been very competitively priced.  We have enjoyed a long period where we had a variety of options for this layer, however as more claims have impacted this layer we have seen a number of insurers participating at this level withdraw; basically this reduction in insurer capacity will lead to price increases although we are doing all we can to mitigate increases as much as we can.

In this changing market, firms will be asked to answer more questions; for example any property work will be under closer scrutiny so firms should be prepared to provide a more detailed breakdown of the work they undertake and have historically undertaken. Meeting the insurer and prospective insurer is also recommended, particularly if the current firm operates in higher risk areas. This will allow insurers to understand just how hard the firm manages and controls risk in this regard.  We are working close with our clients in this respect. 

Engage with insurers much earlier than for previous renewals, as the time of hoping to negotiate a deal during the last few days is well and truly behind us.  As I say, meet with insurers and listen to the questions they are asking.  Use these questions to fine tune your renewal presentation as they are generally asking about areas of concern to them as an insurer.  Finally return your renewal presentation to us in good time prior to negotiations commencing and of course a few weeks prior to the expiry of your current PII policy.  We are encouraging our clients to allow for as much time as possible so we can undertake a full investigation of the options available. 

With insurers facing scrutiny on the portfolios they are underwriting, I would suspect we are entering a period of less insurer choice however standing out from the crowd may open more avenues and options to investigate.

Spend time on your presentation and engage with insurers early. PII is a huge cost for most firms so ensure your broker has wide direct access to the market just in case you need a “Plan B”.

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