One business liability insurance specialist has recently pointed out that there are several risks inherent to the PI insurance industry posed by the recently amended Legal Services Act and the legal services sector’s growing trend towards consolidation in order to create worldwide professional practices through mergers.
Professional liability insurance specialists Brit Insurance suggested that, after wtnessing an increase in insurance claims originating from corporate law firms, some of these legal practices may need to make a careful review of the challenges they will need to overcome the management of multi-disciplinary firms created by new mergers. This is especially prevalent when new practice owners are coming in from a position of unfamiliarity with the legal profession, said Brit underwriter Mark Figes.
Mr Figes said that these new business types face two specific types of risks in their new incarnations. Many of the clients of these new businesses are trading under difficult conditions that have resulted in an increase to the risk of bankruptcy and business failure, he explained.
As claimants hupe that they will succeed in a bid for a significant payout for supposed negligent advice, this leads to an increase in PI insurance claims against the professional advisors of these businesses, said the Brit underwriter. Meanwhile, the second challenge is that a significant proportion of the partners are quite often lacking in experience of how to work within such structures, with no relevant knowledge of working with a multi-disciplinary team comprised of loss adjustment specialists, accountants, and lawyers together.
To combat these issues, Brit has dclared it will be working with Libra, an agency specialising in PI insurance, to detemine the proper amount of required cover.