Insurance

In a nutshell

Insurance is the practice of hedging against financial risk; the practice and its fallout require a lot of legal work. Insurance and reinsurance (even insurers are vulnerable to financial risk and they transfer part of their risk on to reinsurers) are practised by a significant number of specialist law firms and general commercial outfits across the UK. Insurance can be split into many sub-specialisms (see below), and firms may offer all or some of these services. Personal injury and clinical negligence (including public liability, employers' liability, accident-at-work claims etc) are also insurance-related practice areas. Maritime insurance was the first type to exist: read our practice area overview on shipping law for more.

It's possible to insure pretty much anything against almost any eventuality. Put differently, insurance is taken out to cover risks including human error, accidents and natural disasters. The most common types of insurance which lawyers deal with are: insurance against the destruction of tangible assets (eg property); insurance against the loss of intangible assets (eg revenue streams); and insurance against mistakes made by professionals (professional indemnity – the insurance-related bit of professional negligence). Insurance lawyers work on cases related to property damage, product liability, fraud, insolvency, director's liabilities (D&O), aviation, business interruption, mortgage losses, political events, technology, energy, environment, construction, finance... the list goes on. Disputes arise between the insured policyholder and the insurer; between the insured plus the insurer and another party; or between the insurer and the reinsurer.

Some lawyers specialise in the transactional aspects of the insurance industry, advising on tax, regulations, restructurings, drafting insurance policies, and M&A activity between insurance companies.

What lawyers do

Professional indemnity

• Represent professionals accused of malpractice and their insurers. The professions most often affected include engineers, architects, surveyors, accountants, brokers, financial advisers and solicitors as well as GPs, dentists, surgeons etc.
• Investigate a claim, assess its authenticity and look into the coverage of a given insurance policy to determine an insurer's degree of liability.
• Take advice from experts on professional conduct.
• Draft letters in response to claims.
• Prepare documents for court or out-of-court settlements.
• Attend pre-trial hearings, case management conferences and trials if a case goes to court.
• Attend joint-settlement meetings, arbitrations or mediations in out-of-court cases.

Commercial insurance disputes

• Work on claims related to things as varied as properties damaged by flood or fires, oil rigs destroyed by hurricanes, or gold mines nationalised by socialist governments.
• Work on disputes between insurers and the insured over insurance payouts and what insurance coverage consists of, or act for the insurer and the insured together in litigation with a third party.
• Assess coverage and the insurer's liability.
• Interview witnesses to find out how events occurred.
• Value the claim and build up the case for what the client feels is an adequate settlement.
• Attend court or mediations/arbitrations in order to come to a settlement.

Transactions

• Broadly similar to the work of a general transactional lawyer. There are extra rules and regulations governing insurance transactions which lawyers need to take into account.

Realities of the job

• While several legal practice areas fall under the insurance umbrella, the insurance industry itself is a distinct, single block within the City and the UK as a whole. There are a few big well-known insurance companies out there, but over 400 are registered with the famous insurance market Lloyd's of London.
• London is the global centre for insurance and reinsurance and has been ever since Lloyd's of London was founded over 200 years ago. The industry is extremely well established and has its own rules, traditions and obscure terminology. Businesses based overseas will often be insured with a London firm, and the biggest disputes often have an international angle to them.
• The insurance industry has a reputation for being a bit dull; however, the legal side kicks in when calamities occur, making it quite eventful, as any 'wet' shipping lawyer will tell you. It is also home to plenty of colourful characters and big companies organise many events, lectures and conferences for like-minded insurance-o-philes to rub shoulders.
• Insurance is a complex and technical area and insurance policies are not the lightest reading material you'll ever come across. Stints in insurance seats are challenging for trainees, even those who have taken an insurance law elective on the LPC.
• Insurance lawyers are known for their precise and fastidious working style. Good organisational skills are crucial, because lawyers are often dealing with a host of claims at various different stages. There are often daily deadlines and clients need to be kept constantly informed.
• Lawyers have to pay special attention to potentially fraudulent claims or parts of claims.
• Insurance cases range from huge international disputes to small local squabbles. Trainees might run a small case themselves, but only work on a component of a large high-value dispute. Lower-value work is usually done by small or mid-size regional and national firms, while the largest disputes are the preserve of City outfits.
• Many firms regularly act for both insurance companies and insured policyholders. There is a trend towards firms specialising in either policyholder or insurer work.
• The insurance industry is regulated by the Financial Conduct Authority.

Current issues

October 2023

• Unsurprisingly, technology continues to have a profound effect on the insurance market. Insurtech, which refers to the use of technology when it comes to innovating and refining insurance products, is one such example. Utilised to make the insurance industry in general more efficient and available to a wider audience, the potential ramifications it may have on the industry as a whole with regards to AI, IoT, and Blockchain are huge. 
• The vast majority of insurance products in the UK have remained more or less unchanged for a number of years. But there are early indicators of change. Usage-based insurance (also known as pay-as-you-drive and pay-how-you-drive is unique to the car insurance industry: UBI policies allow car insurance companies to calculate the price of insurance based on when customers drive, and how safe their driving is. Reports suggest that this format could also become increasingly popular among commercial tenants paying for insurance on unused office spaces that are becoming more frequent with the uptake of hybrid working.
• The emergence of Environmental, Social and Governance (ESG) concerns among investors will undoubtedly have an impact of the insurance industry, with insurers’ own ESG commitments entering the spotlight. It’s thought that the issue of ‘greenwashing’ means that currently voluntary ESG disclosures will soon become mandatory. According to PwC, the primary focus of ESG within the insurance industry will inevitability become centred around aiding individuals and wider society alleviate and ultimately stave off the likes of natural disasters and heightened cybercrime. If such goals are achieved, the insurance industry will likely benefit from fewer claims faced in addition to enhanced profitability.
• The conflict in Ukraine continues to have an impact on global business, and the insurance industry is no exception. The OECD has reported that some of the major losses for the insurance sector that have stemmed from the Russia-Ukrainian conflict have been experienced within the realm of aviation insurance, in addition to marine insurance, as well as property, trade credit, and political risk insurance. With heavy sanctions placed on Russia, on top of intensified wartime cyber-attacks, commercial property harm and infrastructural damage, it’s fair to say the war in Ukraine will continue to have profound effects on the industry. 
• New risks to insure against are surfacing all the time: lately, insuring companies against cyber-attacks has gathered steam. However, this type of insurance sometimes doesn’t protect against some of the worst effects of data breaches and hacking efforts: declines in share price; regulatory compliance problems; and the company in question getting a sticky bad rep.
• The increase in celebrity scandal in recent years has led to a rise in celebrity ‘disgrace’ insurance, giving companies a payout when their beloved stars get cancelled. The payouts could cover re-creating materials the celebrity appears in and reimbursing the cost of the celebrity’s contract.
• With fears surrounding climate change deepening, it is projected that the insurance industry will come under intense scrutiny with regards to risk identification and action planning. What is particularly striking is that climate change affects both the asset and liability sides of the industry, ultimately leaving insurers heavily exposed to its perils. Despite these fears, regulators and insurers do in fact remain in a strong position to counter, as by developing combative business strategies whilst modifying traditional business models, economic and social effects can be softened. 
• The cost of commercial insurance in the UK has steadied after last year’s dramatic 102% rise, with prices having sprung by just 3% in the first quarter of 2023, according to research conducted by insurance firm Marsh.