LONDON, 21 June 2007 – Less than half of solicitors (46%) are prioritising risk management despite Rule 5 coming into effect on 1 July which demands effective management of the firm. Aon, the UK’s leading insurance broker and risk management consultant, is now urging law firms to shift risk to the top of the agenda to adhere to Rule 5’s requirements and avoid possible sanctions by the Solicitors Regulation Authority (SRA).
When questioned on motivation to buy insurance at renewal, price – unsurprisingly – came top but risk management advice only ranked fourth, according to an Aon survey.
Top drivers affecting decision to purchase
- price 78%
- claims handled by a qualified solicitor 71%
- broker speed of response 62%
- risk management service 46%
- capped excess 45%
However, the new Rule 5, which is part of the Solicitors' Code of Conduct 2007, demands more focus on risk management through the effective management of the firm, including plans on how to continue business in the event of absences and emergencies with the minimum interruption to clients' businesses. The method of delivery is up to the firm but practices will be expected to produce evidence that a systematic and effective risk management approach is in operation and that there are regular reviews of its effectiveness.
Failure to adopt Rule 5 could ultimately lead to sanctions by the SRA and, in extreme circumstances, the Solicitors’ Disciplinary Tribunal.
Patrick Hearn, director at Aon’s professional services group, said: “Some firms have embraced Quality Assurance through the Law Society's own Lexcel standard, ISO 9001, Investors in People or the Legal Services Commission’s Quality Mark for publicly funded work. Others have not recognised Quality Assurance as necessary for their business but this has to change. Rule 5 demands that law firms look at their client and business related risks. Therefore, leading up to the annual professional indemnity renewals, firms must consider how insurance can be supported with risk management advice to conform to the new Code of Conduct.”
Law firms must now ask themselves:
- can we produce evidence of systematic and effective risk management arrangements?
- can we show that these arrangements are regularly reviewed?
- should we commit to an external quality standard or participate in a Quality Assurance exercise to assess our current status and identify the risks?
- how will we comply with the requirement to check with reasonable regularity, the quality of work undertaken for clients – do we have agreed processes and responsibilities for this?
About Aon
Aon Corporation is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. There are 43,000 employees working in Aon’s 500 offices in more than 120 countries. Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions.
This press release contains certain statements related to future results, or states our intentions, beliefs and expectations or predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors. Potential factors that could impact results include: general economic conditions in different countries in which we do business around the world, changes in global equity and fixed income markets that could affect the return on invested assets, fluctuations in exchange and interest rates that could influence revenue and expense, rating agency actions that could affect our ability to borrow funds, funding of our various pension plans, changes in the competitive environment, our ability to implement restructuring initiatives and other initiatives intended to yield cost savings, our ability to execute the stock repurchase program, our ability to obtain regulatory or legislative changes to permit continuous sales of our supplemental Medicare health product, changes in commercial property and casualty markets and commercial premium rates that could impact revenues, changes in revenues and earnings due to the elimination of contingent commissions, other uncertainties surrounding a new compensation model, the impact of investigations brought by state attorneys general, state insurance regulators, federal prosecutors, and federal regulators, the impact of class actions and individual lawsuits including client class actions, securities class actions, derivative actions, ERISA class actions, the impact of the analysis of practices relating to stock options, the cost of resolution of other contingent liabilities and loss contingencies, and the difference in ultimate paid claims in our underwriting companies from actuarial estimates. Further information concerning the Company and its business, including factors that potentially could materially affect the Company’s financial results, is contained in the Company’s filings with the Securities and Exchange Commission.
Aon Limited is authorised and regulated by the Financial Services Authority in respect of insurance mediation activities only
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