Circular No 145/2014
Dated 9 July 2014

To Members of the Malaysian Bar

2015 Professional Indemnity Insurance Premium Maintained at RM1,140

Bar Council is pleased to announce that the 2015 Professional Indemnity Insurance (“PII”) premium has been maintained at RM1,140 per lawyer, the same premium rate since 2013. 

The premium remains unchanged for the coming year largely due to the renewal of the three-year agreement (“TYA”) between Bar Council and the Insurer for the premium years 2015 to 2017.  The new three-year structure will carry on from the previous TYA by maintaining these key details:

(1) Certainty in premium   
Under the TYA, premium pricing for 2016 and 2017 will be based on a pre-agreed structure.  The 2015 premium per lawyer will be used as a benchmark to calculate the 2016 and 2017 premiums.

The pre-agreed structure will see the premium pricing being determined by the claims experience of the PII Scheme.  The main improvement to the new TYA is the widened zero-increase premium bands for 2016 and 2017, and if Members collectively practise good risk management, it would positively impact the premium pricing. 

(2) Stability of the PII Scheme  
The TYA determines premiums based on a six-year (claims) loss ratio average.  This means that if the PII Scheme experiences an unexpected “bad” claims year (eg a sudden spike in 2015 due to an increase in claims), the impact will be mitigated by the PII Scheme’s “good” claims years. 

(3) Protection from insurance market volatility
The TYA protects the PII Scheme from being adversely affected by market volatility and prevents premium spikes caused by external factors.

The TYA underscores Bar Council’s efforts in improving the PII Scheme with its risk management initiatives.  We wish to remind Members that PII should be seen as a last resort, and not the solution to negligence claims.  Members are urged to continue cultivating best practices within their law practices as this will help sustain reasonable premiums in the long run.

Risk Management Tools

In emphasising the importance of having a sustainable and equitable PII Scheme, Bar Council has developed a variety of risk management tools that will be of benefit to Members.  These risk management tools include:

(1) Praktis

Praktis is the Malaysian Bar’s dedicated risk management website that was revamped and launched on 22 May 2014.  It aims to be a one-stop resource centre for both Members and legal support staff by featuring a variety of risk management tools ranging from articles to Bar Council circulars.  The website also features a series of checklists produced by Bar Council.  These checklists, which are also available in CD-ROM format, will serve as a comprehensive and concise list of to-dos for a variety of practice areas ranging from litigation and conveyancing to will-writing.

(2) Jurisk!

The PII and Risk Management Department’s free quarterly risk management newsletter celebrates its 10th year of publication this year and has been the Malaysian Bar’s main platform in cultivating better risk management among its Members. 

(3) Best Practice Guides  

The Best Practice Guides is a series that serves to complement the online materials, and consists of four books entitled Setting Up Practice, Accounting for Lawyers, Time Management and Law Practice Management.  The series has been recently updated and aims to function as an invaluable resource for Members in their endeavours to better manage risks.

(4) Workshops 

The PII and Risk Management Department regularly conducts hands-on workshops to train new practitioners to effectively manage their practices and keep tabs of their accounts.  The department also provides training for legal support staff to raise awareness of risks in the day-to-day administration of a law office.

Broker for PII Scheme 2015

Bar Council reappointed Jardine Lloyd Thompson Sdn Bhd (“JLT”) as the broker to manage the PII Scheme, based on the PII Committee’s recommendation after the Committee’s comprehensive evaluation of the options available.

2015 PII Scheme Terms and Conditions

The terms and conditions for 2015 are maintained from 2014 with no change.  

The salient terms of the 2015 policy are as follows:

No	Item	2015 PII Terms
(1)	Mandatory Limit of Indemnity	Minimum: RM250,000 (one lawyer) Maximum: RM2,000,000 (36 lawyers and above) (Cover for a firm increases by RM50,000 for every additional lawyer up to a maximum of RM2 million)
(2)	Dishonesty of partner employee	Coverage limited to RM350,000 in the aggregate or the firm’s mandatory limit, whichever is lower.  Limited coverage for dishonesty is to encourage law firms to adopt risk management practices.
(3)	Mitigation of Loss Rider Clause	This clause provides protection for a firm’s clients’ monies, as defined under the Solicitors’ Account Rules 1990.  Innocent partners of a firm can be indemnified for mitigating action(s) taken due to embezzlement of clients’ monies, subject to the terms of the policy.
(4)	Defamation	Coverage is the firm’s mandatory limit of indemnity.  Applicable to each and every claim
(5)	Claims Loading	Claims loading is calculated at either: (a) 5% of claims paid; or (b) 5 x 2015 Base Premium, whichever is lower.  Claims loading is subject to a further maximum cap of 25% (to apply over the period of five years).
(6)	Reduced Excess Option	Firms can opt to lower their base excess, subject to payment of additional premium.
(7)	Worldwide Coverage Option	Option for worldwide territorial and jurisdictional coverage available to all firms at an additional premium.

2015 PII Renewals — Online Renewal System

The number of online renewals has increased steadily over the years, with approximately 50% of law firms using the online system for the 2014 renewal. 

A highlight of the 2015 PII renewal will be an update to the online renewal system that removes the need for faxed signatures on the declaration page when completing the online proposal form, and also features the instantaneous production of your invoice, should your law firm have no pending claims. 

Members are reminded that that there will be no preferential treatment for proposal forms submitted in person over those submitted online.  Even if you submit hard copies in person at the JLT office, you will only receive your invoice after 48 hours.  Therefore, we encourage you to complete your PII renewal online as it is convenient and hassle-free. 

On 2 June 2014, JLT sent an email to all law firms requesting law firms to nominate an authorised person.  This is a prerequisite to access the updated online renewal system and we urge all law firms to nominate their authorised persons in anticipation of the 2015 PII renewal period beginning August 2014. 

If you have not received the email from JLT regarding nomination of an authorised person, or if you have any queries on the 2015 PII renewals, please contact JLT’s dedicated MBar Department by telephone at 03-2723 3241 or 03-2723 3388 for assistance.

Help Desk

Should you require further clarification or have any suggestions regarding PII and risk management, please contact the PII and Risk Management Department by telephone at 03-2032 4511, or by email at pirm@malaysianbar.org.my. 

Your feedback is vital to the continuous improvement and progress of the PII Scheme. 

Thank you. 

Ragunath Kesavan
Chairperson
Professional Indemnity Insurance Committee