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I refer to the recent postings on LawyersTalk on PII. Bar Council welcomes all comments and criticism, as there is no one perfect PII Scheme and we are continually working on improving the Malaysian Bar PII Scheme.
When the Malaysian Bar PII Scheme was implemented in 1992, we had no experience, no claims statistics and we were completely in the hands of our professional advisers.
We had to learn on the job and grow
from our mistakes, a good example being the No Claims Bonus (NCB)
structure introduced in 2003, which led to:
i. Arbitrary and punitive claims loading (1000% increase to some firms’ premiums within a year of notifying a claim);
ii. Unequal distribution of premium (20% of firms were contributing to 60% of the premium pool), and
iii. Members reluctant to notify for fear of losing their NCB.
ii. Unequal distribution of premium (20% of firms were contributing to 60% of the premium pool), and
iii. Members reluctant to notify for fear of losing their NCB.
To resolve this problem, Bar Council revamped the Scheme in 2007 and started laying the groundwork for a move to a self–insurance scheme.
We accept that we cannot satisfy the needs of each Member but we strive to ensure that whatever Scheme we have in place is affordable, provides the best terms possible and is sustainable in the long term.
The comments raised in the recent postings @ LawyersTalk are duly noted; we have reviewed the comments and would like to address the concerns and issues raised.
We accept that we cannot satisfy the needs of each Member but we strive to ensure that whatever Scheme we have in place is affordable, provides the best terms possible and is sustainable in the long term.
The comments raised in the recent postings @ LawyersTalk are duly noted; we have reviewed the comments and would like to address the concerns and issues raised.
1. Our Scheme is Mandatory PII Scheme, what is it?
It means that every practicing advocate & solicitor must be insured under one uniform Master Policy and Certificate of Insurance with a uniform set of terms and conditions with an approved insurer.
2. How did Bar Council decide on this Structure?
Between 1987 and 1989, the newly set up Professional Liability Committee (PLC) under the stewardship of Dato Dr Peter Mooney conducted
Upon completion of the study and survey, the PLC recommended the introduction of a Mandatory PII Scheme with one uniform Master Policy. Bar Council reviewed their recommendations, debated the most suitable structure, and followed this by deciding the parameters of our Scheme.
The motion for implementation of a Mandatory PII Scheme with one uniform Master Policy was unanimously carried at the 44th Annual General Meeting of March 1990.
3. Why choose this structure?
We chose a structure that would protect both our Members and the public. A Master Policy Scheme provides us with purchasing power. This purchasing power allows Bar Council to negotiate a reasonable premium and wider scope of cover, ensuring all Members are insured. Insurers are not allowed to cherry pick the firms they would like to insure – they must provide insurance to all lawyers who are allowed to practice by Bar Council, no matter their size, their area of practice or how adverse their claims history.
Fact: insurers tend to favour larger firms. Our legal profession is largely made up of sole proprietors and 2–lawyer firms. As at 20 April 2010, 40% of the profession is made up of sole proprietors and 26% are 2–lawyer firms.
New practices/lawyers, 1 to 2 lawyer firms, a firm with claims history (frivolous or otherwise), firms practising high risk work e.g. conveyancing are generally not viable risks for insurers particularly in a jurisdiction where PII is compulsory. Insurers would readily admit that it is harder to profit and sustain PII for this category of firms in a compulsory scheme and are reluctant to provide PII.
For these reasons, our present structure was and still is the best option especially for our profession.
4. For a well–run firm with no claim(s), surely it would be easy to obtain PII cover in the open market?
General perception is that well–run firms with no claims will obtain cover easily and only ‘bad’ firms with claims will struggle. This is rarely the reality.
The Irish Examiner reported that PII premium in Ireland for a practising solicitor was about RM32,000.00 in 2009. That figure rose to as much as RM96,000.00 per solicitor per annum in 2010. The Director General of the Irish Law Society, Ken Murphy, attributed this to international problems in the insurance market and the collapse in the property market which led to the increase in claims. The Irish Law Society is mulling their next move.
The experience of solicitors in England and Wales, where they have a Qualified Insurance Scheme (QIS), similar to an “open market” Scheme, is another good example of this. In their 10 July 2009 Practice Note on PII, the Law Society of England & Wales warned Members that ‘the renewal process is likely to be just as difficult as, if not more difficult than, last year (2008–09)’.
They go on to state that ‘The solicitors’ PII market hardened during the 2008–09 renewal process…Some parts of the profession were forced to accept significantly increased premiums or were unable to obtain PII from a qualifying insurer at all. Amongst the worst affected ones were:
Even some firms with a clean claims history experienced difficulties.’
Figures for 2009–10 showed that firms who were able to procure PII saw their premium increase by as much as 300%. Firms that were not offered insurance had to subscribe to the Assigned Risks Pool (ARP) where premiums are sometimes as high as 30% of their gross revenue. The ARP was established to provide coverage for those firms unable to obtain insurance from the open market.
The Law Society of England & Wales is contemplating a move away from the QIS; a self–insurance scheme is one of the options under consideration.
5. Why were only those types of firms listed above badly affected?
Insurers, in determining, whether a firm is a viable risk, will look into all aspects of the firm including your practice size, the number of clerical staff, type of work and risk management within the firm.
6. What has insurance market conditions have to do with our Scheme? So long as our firm has no claims, our premiums should remain the same?
There is no way to avoid the fact that an international insurer is affected by world events.
Insurers are likely to increase premiums to recoup losses they have suffered, be it from that particular class of insurance or elsewhere. For example, in the aftermath of 9/11, Hurricane Katrina etc., premiums including those for PII rose globally.
Insurers will also look to reduce losses in hard times by completely exiting the PII market, or they would restrict the type of firms they will cover, or exclude cover for perceived high–risk work such as conveyancing.
This is presently happening in the UK Solicitors’ PII market. Following their move to the QIS/open market in 2000, initially the panel of insurers competed among themselves resulting in substantial reduction in premiums for its Members. These golden years were short–lived as premiums started to escalate following natural disasters and the financial crisis towards end 2008.
7. Would an open market structure be beneficial to us?
Possibly, as the experience of other schemes shows that, in the initial years, insurers would compete for business, however this is usually short–lived.
We would urge Members to seriously give thought to the following very real issues that will impact on you:
Collectively all of the above will add up to the firm’s time, human and financial resources. Firms may eventually have to appoint a third party to handle the insurance procurement and manage claims. Firms on the other end of the spectrum i.e. those unable to obtain PII for various reasons will be driven out of practice.
8. Are our policy terms unfair and inequitable because we have only one Insurer?
No. Two points to be made here: one, in relation to the terms; two, in relation to the approved insurer.
Point one: In relation to Policy terms, Bar Council reviews and negotiates policy terms annually. Always, we endeavour to determine an equitable and fair set of terms across the board for 13,000 Members. Members’ feedback is considered on scope of cover, grey areas in the policy, improvements, variations and add–ons to cover.
By the second quarter of every year, Bar Council will meet with our appointed Brokers to
Our appointed Broker will take these terms to the incumbent insurer as well as the open market to determine who can provide the best quotes and terms.
When selecting the insurer, Bar Council also looks at their claims payment records, service to our Members and financial integrity, not just the terms offered. Do remember that in 2008 we changed our Insurer from Oriental Capital Assurance Bhd to Pacific & Orient Insurance Co. Berhad for various reasons.
Point two: Approved Insurer. Bank Negara regulations require that we have a local underwriter issuing the Policy.
The challenge we have is that the Malaysian insurance market in general lacks the capacity and expertise to underwrite a PII Scheme our size; it requires a high degree of specialisation. Even in the global market, there are very few reliable reinsurers with the capacity and/or specialisation to underwrite a PII scheme for lawyers.
Hence, we strategically have a panel of reinsurers, each taking a portion of the risk supporting our local underwriter. All of them are reviewed on a yearly basis. I’ll talk more on selection criterion and basis of review below.
9. Is our Scheme monopolised by one insurer?
No. The Scheme is not a monopoly; we actually have a local underwriter supported by a panel of reinsurers. At each renewal we have an option to change our Insurer/Reinsurers.
It is also not good practice for a Scheme to have only one reinsurer, as shown by the Hong Kong Law Society’s and New South Wales Solicitors’ Schemes. Both Schemes were left in the lurch when their reinsurer/sole insurer, HIH Insurance Co, collapsed in 2001. Each had to mount their own rescue packages with Members’ funds.
10. How does Bar Council select our Insurer(s)?
The criteria for selection of our Scheme Insurers include:
In a PII policy like ours, claims–made and where claims take between 7 to 8 years to resolve (from notification), continuity is key. Long–term relationship with insurers ensures consistency of cover, expertise and claims management. It also facilitates administration, claims payments, and helps reduce disputes on cover.
In recent years, we have developed a more open and transparent relationship with our Insurers, all serious issues on policy terms and claims management are addressed head on, either immediately or at renewals. And because we have the purchasing power, Insurers are mindful of our requests.
A Workshop is also held at least once a year where all stakeholders of the Scheme meet to dialogue on issues, coverage, streamlining Scheme administration and processes.
11. What about the Self Insurance Fund (SIF) that has been mooted by Bar Council?
Having received mandate from the Members at the March 2009 AGM to implement the SIF, we set implementation for 2010. However, we have had to delay its implementation due to the global financial crisis and the hardening global insurance market. Nevertheless, the SIF will be high on the PII Committee’s agenda this year.
Extreme caution on our part is necessary, as a SIF can collapse very easily if not properly managed.
The UK Scheme is a good example. When the SIF in the UK failed, 70% of the profession supported closing the SIF and going to the open market. Result was the QIS – a panel of 35 qualifying insurers on the open market.
A decade on, UK lawyers are struggling to procure PI cover. The number of law firms in the Assigned Risks Pool (ARP) has increased five–fold to 500 this year. As mentioned earlier, the Law Society of England & Wales is mulling a return to a SIF.
12. What work has gone into the SIF to date?
Much of it has been on research, study, dialogue with other Schemes, and discussion with consultants. In summary:
It means that every practicing advocate & solicitor must be insured under one uniform Master Policy and Certificate of Insurance with a uniform set of terms and conditions with an approved insurer.
2. How did Bar Council decide on this Structure?
Between 1987 and 1989, the newly set up Professional Liability Committee (PLC) under the stewardship of Dato Dr Peter Mooney conducted
a. An extensive 3–year study of other Law Society Schemes, and
b. A Survey of Malaysian law firms to determine the impact on law firms should a compulsory Scheme be introduced.
b. A Survey of Malaysian law firms to determine the impact on law firms should a compulsory Scheme be introduced.
Upon completion of the study and survey, the PLC recommended the introduction of a Mandatory PII Scheme with one uniform Master Policy. Bar Council reviewed their recommendations, debated the most suitable structure, and followed this by deciding the parameters of our Scheme.
The motion for implementation of a Mandatory PII Scheme with one uniform Master Policy was unanimously carried at the 44th Annual General Meeting of March 1990.
3. Why choose this structure?
We chose a structure that would protect both our Members and the public. A Master Policy Scheme provides us with purchasing power. This purchasing power allows Bar Council to negotiate a reasonable premium and wider scope of cover, ensuring all Members are insured. Insurers are not allowed to cherry pick the firms they would like to insure – they must provide insurance to all lawyers who are allowed to practice by Bar Council, no matter their size, their area of practice or how adverse their claims history.
Fact: insurers tend to favour larger firms. Our legal profession is largely made up of sole proprietors and 2–lawyer firms. As at 20 April 2010, 40% of the profession is made up of sole proprietors and 26% are 2–lawyer firms.
New practices/lawyers, 1 to 2 lawyer firms, a firm with claims history (frivolous or otherwise), firms practising high risk work e.g. conveyancing are generally not viable risks for insurers particularly in a jurisdiction where PII is compulsory. Insurers would readily admit that it is harder to profit and sustain PII for this category of firms in a compulsory scheme and are reluctant to provide PII.
For these reasons, our present structure was and still is the best option especially for our profession.
4. For a well–run firm with no claim(s), surely it would be easy to obtain PII cover in the open market?
General perception is that well–run firms with no claims will obtain cover easily and only ‘bad’ firms with claims will struggle. This is rarely the reality.
The Irish Examiner reported that PII premium in Ireland for a practising solicitor was about RM32,000.00 in 2009. That figure rose to as much as RM96,000.00 per solicitor per annum in 2010. The Director General of the Irish Law Society, Ken Murphy, attributed this to international problems in the insurance market and the collapse in the property market which led to the increase in claims. The Irish Law Society is mulling their next move.
The experience of solicitors in England and Wales, where they have a Qualified Insurance Scheme (QIS), similar to an “open market” Scheme, is another good example of this. In their 10 July 2009 Practice Note on PII, the Law Society of England & Wales warned Members that ‘the renewal process is likely to be just as difficult as, if not more difficult than, last year (2008–09)’.
They go on to state that ‘The solicitors’ PII market hardened during the 2008–09 renewal process…Some parts of the profession were forced to accept significantly increased premiums or were unable to obtain PII from a qualifying insurer at all. Amongst the worst affected ones were:
· Sole practitioners,
· Firms with fewer than five partners, and
· Firms that performed conveyancing work.
· Firms with fewer than five partners, and
· Firms that performed conveyancing work.
Even some firms with a clean claims history experienced difficulties.’
Figures for 2009–10 showed that firms who were able to procure PII saw their premium increase by as much as 300%. Firms that were not offered insurance had to subscribe to the Assigned Risks Pool (ARP) where premiums are sometimes as high as 30% of their gross revenue. The ARP was established to provide coverage for those firms unable to obtain insurance from the open market.
The Law Society of England & Wales is contemplating a move away from the QIS; a self–insurance scheme is one of the options under consideration.
5. Why were only those types of firms listed above badly affected?
Insurers, in determining, whether a firm is a viable risk, will look into all aspects of the firm including your practice size, the number of clerical staff, type of work and risk management within the firm.
6. What has insurance market conditions have to do with our Scheme? So long as our firm has no claims, our premiums should remain the same?
There is no way to avoid the fact that an international insurer is affected by world events.
Insurers are likely to increase premiums to recoup losses they have suffered, be it from that particular class of insurance or elsewhere. For example, in the aftermath of 9/11, Hurricane Katrina etc., premiums including those for PII rose globally.
Insurers will also look to reduce losses in hard times by completely exiting the PII market, or they would restrict the type of firms they will cover, or exclude cover for perceived high–risk work such as conveyancing.
This is presently happening in the UK Solicitors’ PII market. Following their move to the QIS/open market in 2000, initially the panel of insurers competed among themselves resulting in substantial reduction in premiums for its Members. These golden years were short–lived as premiums started to escalate following natural disasters and the financial crisis towards end 2008.
7. Would an open market structure be beneficial to us?
Possibly, as the experience of other schemes shows that, in the initial years, insurers would compete for business, however this is usually short–lived.
We would urge Members to seriously give thought to the following very real issues that will impact on you:
a. There is no fall back in an “open market” Scheme. If you are refused PII cover by an insurer it would mean no PII hence no practicing certificate. This will jeopardise the ‘protection’ for Members and the public.
b. Compliance with minimum terms and conditions. Each firm will have to negotiate their own terms and ensure that they meet the minimum standards set by Bar Council, all within the renewal deadline to obtain their practicing certificate.
c. Insurability. Each firm will have to ensure compliance at their own costs with the standards set by an insurer.
d. Free Market Element. Insurers will not be keen to reach out to small firms as the premium per lawyer currently is RM1,300.00 (per lawyer). Their focus would be on the larger firms where premiums can be as much as RM100,000.00 annually!
e. Premiums. Insurers can and will dictate premiums based on market conditions and your insurability.
f. Selecting an Insurer. Although there appears to be many insurers to choose from, in reality there are only select few insurers willing to provide PII cover and even lesser likely to be interested in covering 1 to 2 lawyer firms because they will target the larger firms.
g. Hidden costs. Researching the market for the right insurer who is financially secure and ‘A’ rated, whether they will be willing to insure you, sourcing for the optimum terms and conditions of cover for your firm’s protection, procure ‘run–off cover’ for your retirement, claims handling and risk management.
b. Compliance with minimum terms and conditions. Each firm will have to negotiate their own terms and ensure that they meet the minimum standards set by Bar Council, all within the renewal deadline to obtain their practicing certificate.
c. Insurability. Each firm will have to ensure compliance at their own costs with the standards set by an insurer.
d. Free Market Element. Insurers will not be keen to reach out to small firms as the premium per lawyer currently is RM1,300.00 (per lawyer). Their focus would be on the larger firms where premiums can be as much as RM100,000.00 annually!
e. Premiums. Insurers can and will dictate premiums based on market conditions and your insurability.
f. Selecting an Insurer. Although there appears to be many insurers to choose from, in reality there are only select few insurers willing to provide PII cover and even lesser likely to be interested in covering 1 to 2 lawyer firms because they will target the larger firms.
g. Hidden costs. Researching the market for the right insurer who is financially secure and ‘A’ rated, whether they will be willing to insure you, sourcing for the optimum terms and conditions of cover for your firm’s protection, procure ‘run–off cover’ for your retirement, claims handling and risk management.
Collectively all of the above will add up to the firm’s time, human and financial resources. Firms may eventually have to appoint a third party to handle the insurance procurement and manage claims. Firms on the other end of the spectrum i.e. those unable to obtain PII for various reasons will be driven out of practice.
8. Are our policy terms unfair and inequitable because we have only one Insurer?
No. Two points to be made here: one, in relation to the terms; two, in relation to the approved insurer.
Point one: In relation to Policy terms, Bar Council reviews and negotiates policy terms annually. Always, we endeavour to determine an equitable and fair set of terms across the board for 13,000 Members. Members’ feedback is considered on scope of cover, grey areas in the policy, improvements, variations and add–ons to cover.
By the second quarter of every year, Bar Council will meet with our appointed Brokers to
a. Review claims statistics, claims data, emerging risks and Members’ needs;
b. Discuss our Members’ needs and discuss the terms for the following policy year.
b. Discuss our Members’ needs and discuss the terms for the following policy year.
Our appointed Broker will take these terms to the incumbent insurer as well as the open market to determine who can provide the best quotes and terms.
When selecting the insurer, Bar Council also looks at their claims payment records, service to our Members and financial integrity, not just the terms offered. Do remember that in 2008 we changed our Insurer from Oriental Capital Assurance Bhd to Pacific & Orient Insurance Co. Berhad for various reasons.
Point two: Approved Insurer. Bank Negara regulations require that we have a local underwriter issuing the Policy.
The challenge we have is that the Malaysian insurance market in general lacks the capacity and expertise to underwrite a PII Scheme our size; it requires a high degree of specialisation. Even in the global market, there are very few reliable reinsurers with the capacity and/or specialisation to underwrite a PII scheme for lawyers.
Hence, we strategically have a panel of reinsurers, each taking a portion of the risk supporting our local underwriter. All of them are reviewed on a yearly basis. I’ll talk more on selection criterion and basis of review below.
9. Is our Scheme monopolised by one insurer?
No. The Scheme is not a monopoly; we actually have a local underwriter supported by a panel of reinsurers. At each renewal we have an option to change our Insurer/Reinsurers.
It is also not good practice for a Scheme to have only one reinsurer, as shown by the Hong Kong Law Society’s and New South Wales Solicitors’ Schemes. Both Schemes were left in the lurch when their reinsurer/sole insurer, HIH Insurance Co, collapsed in 2001. Each had to mount their own rescue packages with Members’ funds.
10. How does Bar Council select our Insurer(s)?
The criteria for selection of our Scheme Insurers include:
a. Financial security (insurer’s rating, stability, etc.);
b. Good claims payment record;
c. Have a portfolio of PII experience in underwriting law schemes;
d. Have qualified and experienced PII claims personnel who are able to manage claims.
b. Good claims payment record;
c. Have a portfolio of PII experience in underwriting law schemes;
d. Have qualified and experienced PII claims personnel who are able to manage claims.
In a PII policy like ours, claims–made and where claims take between 7 to 8 years to resolve (from notification), continuity is key. Long–term relationship with insurers ensures consistency of cover, expertise and claims management. It also facilitates administration, claims payments, and helps reduce disputes on cover.
In recent years, we have developed a more open and transparent relationship with our Insurers, all serious issues on policy terms and claims management are addressed head on, either immediately or at renewals. And because we have the purchasing power, Insurers are mindful of our requests.
A Workshop is also held at least once a year where all stakeholders of the Scheme meet to dialogue on issues, coverage, streamlining Scheme administration and processes.
11. What about the Self Insurance Fund (SIF) that has been mooted by Bar Council?
Having received mandate from the Members at the March 2009 AGM to implement the SIF, we set implementation for 2010. However, we have had to delay its implementation due to the global financial crisis and the hardening global insurance market. Nevertheless, the SIF will be high on the PII Committee’s agenda this year.
Extreme caution on our part is necessary, as a SIF can collapse very easily if not properly managed.
The UK Scheme is a good example. When the SIF in the UK failed, 70% of the profession supported closing the SIF and going to the open market. Result was the QIS – a panel of 35 qualifying insurers on the open market.
A decade on, UK lawyers are struggling to procure PI cover. The number of law firms in the Assigned Risks Pool (ARP) has increased five–fold to 500 this year. As mentioned earlier, the Law Society of England & Wales is mulling a return to a SIF.
12. What work has gone into the SIF to date?
Much of it has been on research, study, dialogue with other Schemes, and discussion with consultants. In summary:
2006 | : | Discussions to implement the SIF began, including study and research into other SIFs. |
2008 | : | Consultant was appointed via open tender to conduct a SIF Feasibility Study. |
2009 | : | In February, Consultant’s Feasibility Study Report completed and submitted to Bar Council.In the Report, after considering the Scheme’s historic statistical data, this included financial projections, capitalisation and operational structures; the Consultant confirmed that the move to a SIF is viable. |
The issue now, is one of timing the SIF implementation to capitalise on investment returns in the SIF’s initial years.
13. Can we view the Feasibility Study Report?
Members are welcomed to view the SIF Feasibility Study Report at the Bar Council Secretariat, Monday – Friday (8.30am – 5.30pm). For more information, contact Nazihah at 03 2032 1870.
The Feasibility Study Report was summarised in the ‘Self–Insurance Fund (SIF): Working Paper’ (SIF Working Paper) and it was enclosed with the 2009 SIF Motion in the 2008/09 Annual General Report (AGR). All Members should have received a copy of the 2008/09 AGR which was distributed in CD–ROM format last year.
As for the SIF Working Paper, Members can download it from the SIF Discussion Board at the Malaysian Bar website. Go to http://www.malaysianbar.org.my/self_insured_fund.html
14. If the SIF Plans began in 2006, why have Members not been kept informed of progress?
· In 2008, we went on a Roadshow to State Bars to explain our SIF proposal;
· Numerous Q&As and writeups were circulated to Members and through Bar Council Circulars;
· Updates are provided regularly in Jurisk! Editorials and since 2009, Bar Council’s PI Bulletin;
· We have published various papers and a SIF FAQ Series in Jurisk!;
· Case studies on the various jurisdictions e.g. Australia, British Columbia, etc. that have self–insurance schemes have also been published; and
· In line with feedback received at the March 2009 AGM, we organised a SIF Dialogue in July 2009. It was however cancelled as less than 5 people signed up for it.
· Numerous Q&As and writeups were circulated to Members and through Bar Council Circulars;
· Updates are provided regularly in Jurisk! Editorials and since 2009, Bar Council’s PI Bulletin;
· We have published various papers and a SIF FAQ Series in Jurisk!;
· Case studies on the various jurisdictions e.g. Australia, British Columbia, etc. that have self–insurance schemes have also been published; and
· In line with feedback received at the March 2009 AGM, we organised a SIF Dialogue in July 2009. It was however cancelled as less than 5 people signed up for it.
All SIF publications are available online at the Malaysian Bar Website’s SIF Discussion Board.
15. How is the Broker appointed?
The PII Committee with a mandate from Bar Council holds an open tender every two years; this ensures fairness and transparency. Notice of tender is advertised in a national daily and circulated to Members of the Malaysian Insurance & Takaful Brokers Association (MITBA).
After the Tender and considering the PII Committee’s recommendations, Bar Council appoints the Broker.
16. What are prerequisites to selection of Broker?
Critical areas emphasised are:
a. Broking services;
b. Value added services;
c. Ability and past experience in PII Scheme administration;
d. Claims management capabilities;
e. IT resources;
f. Remuneration;
g. Future proposals.
b. Value added services;
c. Ability and past experience in PII Scheme administration;
d. Claims management capabilities;
e. IT resources;
f. Remuneration;
g. Future proposals.
17. What happens during the Tender? How does Bar Council make a decision?
The tender process is in two stages. First, the brokers submit their Tender Proposals. Next, the broker gives a presentation to the PII Committee and Bar Council Members.
At the presentation, Bar Council pays attention to the broker’s team, their abilities, their experience and their response to queries raised.
Bar Council decides on the broker based on the above criteria. As mentioned, emphasis is placed on key areas of the Scheme i.e. broking services, administration of the Scheme, claims management, risk management and more recently, experience with self–insured schemes.
18. What does the Broker do to earn their fee?
Insurance broking aside,
a. The broker processes the PII renewals – issuing proposal forms, processing proposal forms, issuing mandatory premium invoices, collecting payment, issuing firms’ Mandatory Schedules and Certificates of Insurance.
b. They respond to the flood of telephone calls during this period and attend to walk in lawyers;
b. They respond to the flood of telephone calls during this period and attend to walk in lawyers;
Presently there are over 5,000 firms and approximately 13,000 lawyers. It is not feasible for the Bar Council Secretariat to manage renewals of Sijil Annual/Practicing Certificates including processing PII proposal forms; it would be a mammoth task for the Secretariat. We simply do not have the space, man power or resources to manage PII renewals for 5,000 firms yet.
19. Why do we need a Broker?
Reasons:
a. To gain unrestricted full access to the insurance and especially reinsurance market;
b. To negotiate and procure the best available terms from various insurers/reinsurers;
c. To manage our Scheme’s data;
d. To independently analyse our Scheme’s claims statistics including financing actuarial reports;
e. PII policy renewals – to provide the man power to conduct renewals and attend to our Members’ needs;
f. Procure Top up.
b. To negotiate and procure the best available terms from various insurers/reinsurers;
c. To manage our Scheme’s data;
d. To independently analyse our Scheme’s claims statistics including financing actuarial reports;
e. PII policy renewals – to provide the man power to conduct renewals and attend to our Members’ needs;
f. Procure Top up.
The first one is the most important: Bar Council on its own cannot access the reinsurance markets directly. Most reinsurers are accessible only via a broker.
Further, we lack the capacity, expertise or resources to procure reinsurance. This is a time consuming and demanding endeavour. It is the broker, with their contacts and know–how, who elicits the best terms from the best reinsurers.
20. Why can’t the PII Committee do this?
The PII Committee is fully dedicated and committed to the betterment of the Scheme. Whilst members serve on a voluntary basis and sometimes it can be a difficult thankless job, it is our vision that the Bar has the upper hand in managing the Scheme for the benefit of members.
Presently it is an uphill task as we lack the time and the expertise to approach reinsurers but we are slowly making headway. As a result, our hard work over the past years is paying off, as we are definitely more in control of the Scheme than we have ever been! We are more proactive in our dealings with the Insurers as we do not leave negotiations solely to the Broker. In the run up to renewals, regular joint meetings are held to brainstorm enhancements to our policy.
Members of the PII Committee are dedicated to our cause and working hard to enhance our knowledge in PII, especially on administration of the Scheme, negotiation of terms, claims management and risk management – key elements to any successful PII Scheme.
21. So, what does the PII Committee do?
Primarily, we:
a. Oversee renewals negotiations – participate in all negotiations with insurers/reinsurers; review terms sourced by the Broker from the insurance market, etc.
b. Consider means to improve the PII Scheme and terms annually;
c. Monitor the Broker, review their performance and service levels regularly to keep them on their toes!
d. Are responsible for raising awareness on risk management and to devise tools aimed at enhancing risk management practices in law firms.
e. Assist Members with PII and claims issues.
b. Consider means to improve the PII Scheme and terms annually;
c. Monitor the Broker, review their performance and service levels regularly to keep them on their toes!
d. Are responsible for raising awareness on risk management and to devise tools aimed at enhancing risk management practices in law firms.
e. Assist Members with PII and claims issues.
In the last few years, we have also:
a. Extensively studied, benchmarked and accordingly improved our Scheme against other Schemes’ structures and terms;
b. Revamped the Scheme and begun the move to a self–insurance fund;
c. Dialogued with other successful PI Schemes in Canada and Australia to gain insight into how they developed their Schemes. Gained knowledge is an advantage in negotiations with the insurers;
d. Obtained insurer’s agreement to fund risk management initiative – to date we have developed practice tools, newsletters, practice guides and workshops.
e. Initiated set up of an independent third party claims administrator, Echelon Claims Consultants Sdn. Bhd to manage the Malaysian Bar PII Scheme’s claims exclusively. This has led to more efficient management of notifications and claims.
f. Enhanced Policy terms e.g. simplify claims loading structure; negotiate removal of hazard and responsibility loadings; and inclusion of Loss Mitigation Clause which aims to protect a firm’s trust monies (Client Accounts) in the event of misappropriation of funds, subject of course to other terms and conditions of the Policy being satisfied;
g. Fine–tuned and streamlined the renewals process with the broker’s assistance. In 2009, we debuted our online proposal form which is pre–populated with each firm’s information from the previous year thus making renewals a fast and efficient exercise now.
h. Taken more control of the Bar Council–Broker relationship via a Service Level Agreement (SLA). Since 2008, we have also capped the broker’s remuneration.
i. Stepped up services for Members e.g. Master Policy and Certificate of Insurance are finalised and sent to Members by the first quarter of every year annually; set up the Help Desk at Bar Council secretariat to assist Members with their PII and practice queries.
j. Continually educate Members and raise awareness on PII through roadshows, publications like the PI Bulletin, and workshops/forums.
b. Revamped the Scheme and begun the move to a self–insurance fund;
c. Dialogued with other successful PI Schemes in Canada and Australia to gain insight into how they developed their Schemes. Gained knowledge is an advantage in negotiations with the insurers;
d. Obtained insurer’s agreement to fund risk management initiative – to date we have developed practice tools, newsletters, practice guides and workshops.
e. Initiated set up of an independent third party claims administrator, Echelon Claims Consultants Sdn. Bhd to manage the Malaysian Bar PII Scheme’s claims exclusively. This has led to more efficient management of notifications and claims.
f. Enhanced Policy terms e.g. simplify claims loading structure; negotiate removal of hazard and responsibility loadings; and inclusion of Loss Mitigation Clause which aims to protect a firm’s trust monies (Client Accounts) in the event of misappropriation of funds, subject of course to other terms and conditions of the Policy being satisfied;
g. Fine–tuned and streamlined the renewals process with the broker’s assistance. In 2009, we debuted our online proposal form which is pre–populated with each firm’s information from the previous year thus making renewals a fast and efficient exercise now.
h. Taken more control of the Bar Council–Broker relationship via a Service Level Agreement (SLA). Since 2008, we have also capped the broker’s remuneration.
i. Stepped up services for Members e.g. Master Policy and Certificate of Insurance are finalised and sent to Members by the first quarter of every year annually; set up the Help Desk at Bar Council secretariat to assist Members with their PII and practice queries.
j. Continually educate Members and raise awareness on PII through roadshows, publications like the PI Bulletin, and workshops/forums.
We are aware of our position and what we would like to achieve for our Scheme. However, there is a lot of hard work involved and new Members joining the Committee must acquire, in a short time, knowledge of PII, the issues and challenges faced by the Scheme.
Thus far, we have been fortunate enough to have a good mix of senior and young lawyers serving on the Committee. Most have some experience in insurance. This has been enhanced through regular Workshops, refresher courses and joint dialogue with the Scheme stakeholders.
We hope that more Members will join the PII Committee and support us in our endeavours. An open invitation is sent out annually to Members to serve on the PII Committee. Please do write in to the PII & RM Department (Attn: LiChin) should you wish to serve on the 2010/11 Committee.
22. If PII Committee Members are not full time, who assists the Committee?
We set up our own PII & RM Department in 2006. The Department provides assistance and support to the PII Committee and ensures that Members have access to reliable information on PII.
23. How does Bar Council get the best from the Broker?
The Bar Council–Broker relationship and services to be provided is set out in a SLA. This SLA is reviewed every year to keep the broker on their toes.
The PII Committee holds regular meetings with the Broker as we are mindful that any broker must be pushed and driven to provide optimum service in return for their appointment.
In conclusion, we have progressed much since 2007 when we revamped our Scheme structure. Frankly that revamp started, as back then, we too had some concerns about our Scheme. I trust that we have addressed your concerns and you now have a better understanding of our Scheme, the challenges we face and how we appoint the broker, insurer/reinsurers.
We welcome Members’ constructive views and feedback to improve our Scheme; we do need your continued support and participation at our various initiatives. We urge Members to participate in the various forums/talks organised by the PII & RM Department.
Please do not hesitate to contact our officers if you have any queries:
Wong Li Chin D : 03 2032 4511 E : lcwong@malaysianbar.org.my
Nazihah A. Rahim D : 03 2032 1870 E : nazihah@malaysianbar.org.my
Ragunath Kesavan
President/PII Committee Chairperson
Malaysian Bar