Your law firm leadership is relying on you to both understand the changing legal industry and the alterations to the important services that you purchase to run the firm’s operations. These are five changes in the law firm insurance world that directly impact your firm.
1. Health insurance: Health care and health insurance have changed more over the past few years (post-Affordable Care Act) than the previous 30 years. Insurance companies have entered and exited new markets often with brand-new plan designs and major financial differences. Premiums remain high with the biggest new changes that the coverage structures vary largely between plan designs. The days of a straight simple deductible and coinsurance are long gone.
Evaluating new options for your firm’s health insurance program now needs to incorporate the new tax law, explore the legal HR protocols, include financial models and review new benefit technologies that often interface with insurance offerings.
2. Professional liability insurance: While professional liability insurance products are not undergoing structural changes like health insurance offerings, there are notable trends that affect them:
- The way law firms are structured has evolved (fewer equity partners, more of-counsel relationships, joint ventures, etc.).
- Law firm legal liability has increased due to claims.
- The relative cost to higher limits has plummeted due to healthy competition in the market.
All of this means that professional liability analysis must be deliberate and handled proactively by a specialist in the legal insurance industry.
3. Office insurance: As a law firm’s actual physical assets have become less expensive due to the trend of simpler offices, dropping hardware prices and the growth of cloud services, a good analysis of your office insurance could lead to actually lowering your coverage. As your firm moves to a full a paperless environment, client data backup coverage — known in insurance geek speak as Valuable Papers Coverage — could be significantly reduced (along with its premiums) or might not be necessary at all.
4. Employment practices liability insurance: As the general population is getting older, our law firms are getting older, too. Employment legal and business professionals are warning that smart organizations are preparing for this eventuality. You will be dealing with an increasing amount of age-related challenges and inevitable disabilities and impairments. The firm is responsible for all the work product, so monitoring and occasional interventions will be needed in the near future. Expect this to lead to more claims of age discrimination, which will disrupt your firm and force more reliance on employment practices liability insurance for human resource tools and financial protection.
5. Cyber liability insurance: Insuring against the unauthorized release of private information has changed at a rapid pace. The constant stream of news stories about private businesses and government entities being the source of cyber events and cyber damage behooves us in the legal industry to take this risk very seriously. It is critical that your firm evaluates your risks in this area, get ready for the eventuality of a breach and procure a comprehensive cyber insurance policy that includes first-party coverage replete with a team of professionals available when you need them.
Change is never easy. Undoubtedly, you will receive pushback from some stakeholders about the work expended to appreciate and evaluate these changes. In some instances — like with new cyber liability insurance — it may even cost you more money than before. Ironically, a common criticism that law firm partners have about law firm administrators is that they don’t force change enough.
The thing to keep in mind is that while we do not have any control over change, we do control how we handle change and how we adapt to it to minimize any negative effects and maximize the benefits of the changing environment.
ABOUT THE AUTHOR
Uri Gutfreund is the National Law Firm Practice Leader for Risk Strategies Company, a national top 25 insurance broker. He and his multidisciplinary team advise law firms on all types of insurance and benefits. Gutfreund is a frequent speaker at legal conferences, and a writer and blogger on insurance and risk management.
Continue the Conversation in National Harbor
Learn more about why legal management professionals are vulnerable in this changing environment and how to develop skills that make you valuable to your firm and the job market. Uri Gutfreund presents the session “You’re Fired: Why the Managing Partner Might Ax You Soon” at this year’s Annual Conference & Expo, May 3-6.