Earlier this month, the International Underwriting Association (“IUA“), the body representing underwriters in London that are separate from Lloyd’s, penned an open letter calling on the legal industry to allow insurers to cancel professional indemnity policies when lawyers fail to pay their premiums in the wake of the COVID-19 pandemic.

As they currently stand, the existing rules uniquely prevent underwriters from being able to cancel professional indemnity (“PI”) insurance policies if lawyers fall behind on premium payments.

According to the IUA, the objective of their proposal would be to improve policy management and allow flexibility for negotiations to provide lawyers with the cover they are paying for. Crucially, the IUA clarified that they are not proposing a change in the scope of insurance that underwriters offer to solicitors.

The IUA noted that the complete lack of any protection for insurers around payment of premium and excesses by lawyers is not seen in any other regulated industry.

The impact of the COVID-19 on claims and cover

COVID-19 has caused economic pressures and many solicitors’ firms have felt this. The director of legal and market services at IUA noted that the body has, “seen an increase in requests for payment of premiums by instalments”, which it says is indicative of the financial pressures currently faced by solicitors.

PI insurance is of course extremely important in times like these. The pandemic has presented firms with a new landscape of working; from home, sometimes with limited or stretched IT services that could be exposed to cyber- attacks, less “hands on” supervision for junior lawyers and ever-cautious clients. This presents a potential breeding ground for a rise in negligence claims against law firms, as we saw after the financial crash in 2008.

At the same time, the IUA has said the lack of payment protection for insurers could become “commercially unacceptable”, leading to a widespread restriction in the supply of professional indemnity insurance for solicitors if the issue is not addressed.


Whilst the Solicitors Regulation Authority and Law Society are working with the insurance industry with regard to enforcement action against solicitors who fail to pay their premiums and excess, this open letter from the IUA calls for change that is more meaningful.

The Law Society has commented that it understands the concerns of insurers but needs to balance the “primary purpose” of indemnity insurance, which is to protect clients and the public.

The Law Society last month warned the legal industry that, whilst most law firms typically renew their policies in October, given the troubled market and rising premium costs brought on by COVID-19, it would be prudent for lawyers to act early to avoid delays.