Published on May 21st, 2014 | by Pete0
Will Lexcel accreditation lower my PII premiums?
With the launch of a new quality standard in any profession, only one thing is certain. That’s the sudden emergence of an army of consultants queuing up to tell us why we cannot afford to be without this shiny new logo – and why obtaining it without their help is going to be nigh on impossible. In reality, the take-up rate is determined usually by a simple costs benefits analysis. Having to spend a certain amount of time and money on applying for (and equally as important, maintaining) a quality mark is inevitable. Professionals need to be satisfied that the whole process is going to be worth the effort.
Lexcel is a case in point. The latest version of the Law Society’s practice management standard has been in place since 2011 and the emphasis is now squarely on the management of risk. One of the most often quoted advantages of Lexcel accreditation is the fact that it results in reduced professional indemnity insurance. If this is true, and given the current climate (and especially the annual headache faced by firms when it comes to policy renewal), why then is the number of firms with Lexcel accreditation still so low?
What is stopping firms applying for Lexcel accreditation?
There are undoubtedly those firms who feel that Lexcel accreditation is a waste of time. Some of these firms will no doubt take the view that they already have a solid client base and reputation which in their eyes, is not going to be affected one way or another by an unfamiliar logo cluttering up their letterhead. As far as any perceived link between accreditation and insurance premiums are concerned, they are yet to be convinced. They have not had any problems getting cover in the past; they have a solid relationship with their broker and never once has it been stated categorically that having the badge will shave money off their premium.
There are also those firms for whom the thought of subjecting themselves to another audit-like process is a hassle they could quite frankly do without. Yes, they realise that their file management and internal audit process could do with being tightened up – but diverting resources to the application process is something that can be put off until next year.
Lexcel and PII: will I get a reduction?
It would be too much to expect of any accreditation mark for it to guarantee an automatic reduction in premiums. As such, firms are unlikely to find that their provider of professional indemnity for solicitors will promise a cut next year solely on the back of the firm obtaining it.
So does it make a difference? The answer is yes: perhaps not for the accreditation itself, but because of what is required from a firm in terms of demonstrating an effective management framework in order to get the accreditation. This is especially the case when it comes to management of risk. The Lexcel requirement for firms to have a business continuity plan, including an evaluation of potential risks and effective ways to address those risks (e.g. regular reviews, checks for inactivity, recording of key dates): these are all precisely the business practices that keep the potential for negligence claims at bay.
Of course, many firms will state that they already have such processes in place. The point about Lexcel is that it demonstrates to insurers that this has been independently verified. It is no accident that the question ‘Are you accredited with Lexcel?’ generally appears within the Risk Management section of an insurance proposal form directly before questions querying your file audit system.
The Law Society has previously suggested 69.1% of accredited firms feel they benefit from lower premiums. Some might question the accuracy of this – but being able to demonstrate that you take risk management seriously (rather than merely saying that you do) is almost certainly going to be worth it in the long run.