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Challenges for start-up firms

Firms without any proven track record must go the extra mile to make a positive impression on insurers, including producing a comprehensive business plan and demonstrating their risk management, writes Steve Holland

21 June 2016

A start-up firm can only open its doors
and commence practising once it has arranged a professional indemnity insurance (PII) policy for the minimum level required by the Solicitors Regulation Authority (SRA). The compulsory limit of indemnity for sole practitioners and partnerships is £2m, which is increased to £3m if operating as an incorporated firm or a limited liability partnership (LLP).

Although the process of applying to insurers for quotations is very much the same as for an existing firm, a start-up firm does face additional challenges. An insurer generally underwrites a firm based on its risk profile of past work, revenues, historical claims, and financial stability, among other rating factors. For start-up firms, these criteria are not available and so they must present themselves to insurers based on what they project will be their business model and risk profile.

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