’Law firms will be very glad that PI premiums appear to have begun to soften,’ says partner

Fewer law firms are having to close their doors due to difficulties in obtaining professional indemnity (PI) insurance.

That was according to research by accountancy firm Hazlewoods, which found that 34 law firms closed due to lack of PI in 2022/23, down from 65 in 2019/20.

PI cover is mandatory for all law firms and is used to pay for the costs of professional negligence claims made by customers. 

Hazlewoods said this was one of the top three expenses for law firms, alongside staffing and property costs.

However, the business said that this cover was becoming more accessible due to a drop in the price of insurance.

”This has been driven by more insurers entering the market, as well as an increased appetite from law firms to switch insurance providers for a better rate,” Hazlewoods said.

Market softening?

This came as Howden’s Market Report, published in January 2024, revealed that 66% of its law firm clients achieved a rate decrease in their PI premiums in October 2023, as more law firms negotiated lower fees with their providers.

Hazlewoods felt this had contributed to a ”softening market for law firms looking to renew their PI”.

Ian Johnson, partner at Hazlewoods, said: “Law firms will be very glad that PI premiums appear to have begun to soften – some firms had been finding coverage difficult, even at very high prices.”

“It’s still a very tough market for firms that insurers see as higher-risk – such as those that handle larger volumes of conveyancing work – but for others the cost of PI appears to have settled somewhat.”