The Proposal Form is the key document for achieving that aim, as well as assessing the claims history of the firm (often over a 10 year period). Given the importance of the Proposal Form, it is no surprise that year on year insurers will tweak what is asked to reflect issues they are experiencing, regulatory changes, and possible future trends of concern. As we emerge from an 18 month lockdown where many lawyers will have spent close to 100% of their time at home, it is a good time to reflect on what information insurers may want to request during the October renewal season. Two key areas come to mind:
- a deep understanding of a firm’s future working at home policy/supervision plans
- clarification of expected matter related hours
I will look at each of these, but first will explain why they are important. Firstly, an over-arching cause for many claims is a lack of supervision. Of course, that does not apply where the mistake is made by the partner/supervisor, but in many other instances the claim that arises is capable of being avoided. It is no coincidence that conveyancing-based claims remain prevalent, and yet supervision in this ‘volume-driven’ work-type can be limited.
Second, levels of stress / being over-worked is a common feature of claims. Whilst viewing a particular transaction in isolation does not always identify this, when you start asking simple questions around what other transactions someone had on at the same time, what their matter related hours were that year, or whether there were any career or personal stresses in play, the platform for a mistake becomes more obvious. At times, it can be a burning platform. Recently, the headline “Is Mental Health the New Law Firm Metric’ appeared in The Global Lawyer, the implication being that this is becoming an increasingly serious issue for professional firms. Added to that, there is an increasing ‘hot’ market for lawyers and, particularly in the City, a salary war. However, a high salary comes at a personal cost with increased workloads being required to justify it.
Working from home
When you actually think about what the words ‘working from home’ mean, in another era these would cause a rebellion against employers. A key highlight of being at home was to be ‘away from work’. What is the counter to this? Playing at work? I am being intentionally glib but the point I am keen to make in the risk context is that they are two very different environments. Not just that, but having a clear distinction between work and home life has traditionally created a healthy distance between the everyday stresses of the job, as well as a time to reflect (often sub-consciously) on things that have arisen, and to gain perspective.
During lockdown, the country was ordered to work from home if we can. Technology has assisted this for many areas of business, and for lawyers it has largely been possible to do. As a result, and as the country starts to plan for the future, employers across the country are working out how they will operate and, in particular, the extent to which working from home will continue to play a part. On a weekly basis, law firms are announcing their policies around this and the clear trend looks like lawyers having the ability to work from home at least two days a week (40%). Some greater, some less. What is not announced is what supervision policy is in place to manage the resulting disjointed working practices across the business, and how the impact of this change will be managed regarding the development of the lawyers of the future. That will be critical in terms of managing the associated risks, and indeed the risks for the medium-term.
The profession has responded well during the pandemic, and this will have been aided by colleagues knowing each other, as well as having a firm identity. The stronger the leadership and collegiality going into March 2020, the better chance any business had of managing the challenges. However, and as we emerge, the concern will be that these are depreciating assets unless businesses bring their people back together. Also, the reasons for structural change to working patterns also need to be compelling (for all concerned) and not made on a whim or trend. If ‘cost saving’ is one of them (ie reducing a firm’s property portfolio, which appears to be the case for some) then this would fall into the short-term gain category and really should not be a reason for change at all, simply a consequence of it. What is important is what is right for a business’ medium and long term future. Without that, employees will find themselves just ‘at home’, with no work.
I am firmly of the view that this change to working practices is something which is a clear ‘risk factor’. Insurers will need to consider what information they want to know in terms of a firm’s plans, and in particular they may want to be asking about supervision policies, so as to assess the risk impact. Whilst many firms may well adopt a 40% policy, just because everyone is doing it, does not mean that the risk assessment is unaffected. As such, the issue is multi-layered. Consideration may need to be given as to whether the concept of working from home presents an increased claims risk, whether the % of time at home increases that risk further, and whether the level of structure around new working practices has a further impact. If the conclusion is that these issues impact on risk assessment, then focused questions in the Proposal Form will assist the rating of that risk.
Matter related hours
This phrase is something all lawyers are brought up with. A badge of honour for some, certainly back in the day. However, for insurers it is an area which may warrant closer scrutiny when assessing risk as we look ahead. For example, a traffic light system may assist rating decisions, where matter related hours of up to 1450 are perhaps ranked as ‘green’, up to 1550 are ‘amber’ and above that level the ranking is ‘red’. In essence, it is important to look at the engine of the firm to assess how the turnover is being created. Simply factoring in the turnover can be misleading.
Recent months has seen the legal press focusing heavily on wellbeing, with articles on ‘burn-out’ and toxic cultures. Whilst any well run law firm will always have the wellbeing of their staff at the very top of their agenda, at the same time you regularly hear of matter related hour targets of 1500 or above, with increases then being made to these. Whilst the rating impact is something that insurers will need to assess, there will likely be a synergy between higher hours, increased stress levels, and less supervision, all of which will likely increase the risk of mistakes being made.
Again, insurers may want to focus on this aspect in Proposal Forms, both in terms of stated targets for lawyers over a five year period (so as to pick up any upward trends), as well as a firm’s average per lawyer. Of course, more flexible working arrangements may well assist managing the demands that come with the job, but that will only go so far.
Change is inevitable, and the legal professional has seen an incredible level of change over the last decade. This is simply the next phase and it is one that insurers will want to monitor closely, so as to ensure they are well placed as possible to assess its impact.