Professional indemnity hikes fuelling migration to legal consultancies
Further research from Mazars suggested that closures of law firms over failures to obtain insurance have increased sixfold in five years
A rise in professional indemnity insurance (PII) premiums is driving independent legal practitioners to become consultants for larger firms in increasing numbers, according to law firm Taylor Rose MW.
Taylor Rose MW recently revealed it has more than doubled the number of consultant solicitors in its legal consultancy division within the past year, with its growth momentum helped by an “increased acceptance” of home working since the pandemic.
It said this growth is being further fuelled by the pressure on smaller firms and sole practitioners over increasing PII premiums. It added that a recent report from Lexis Nexis revealed that PII has increased by an average of 30% amongst SME firms, with two-thirds of respondents saying the cost of PII was among the biggest threats to their firm.
Further research from Mazars suggested that closures of law firms over failures to obtain insurance have increased sixfold in five years.
Taylor Rose said insurers are also becoming more “risk-averse” in areas such as conveyancing and have been pushing up premiums to cover potentially high payouts. The increased number of solicitors working from home since Covid has also increased risk for insurers, particularly for those working in smaller firms without well-established risk, compliance and quality control processes.
As such, Taylor Rose MW notes this is “making life very difficult” for startups and sole practitioners. Its analysis revealed that the number of sole practitioners regulated by the SRA has dropped by 5% in the past six months alone.
Adrian Jaggard, CEO, Taylor Rose MW, explained: “Increasing PII premiums have particularly impacted smaller firms and sole practitioners and it is having a marked impact on their appetite to keep operating independently.
“We are seeing a lot of experienced solicitors who no longer want the responsibilities of compliance and increasing operating costs, and instead are seeking the relative security and freedom of operating as consultants. This is certainly a contributing factor to the fast growth of our consultancy division.”
