Every professional indemnity policy carries a self-insured excess - the first slice of a claim the firm bears itself. What is unusual about solicitors' cover is that the Solicitors Regulation Authority's Minimum Terms and Conditions dictate how that excess may operate. The MTC allows an excess, but constrains it so that the excess protects the insurer's exposure to small claims without undermining the client protection that the rest of the regime is designed to deliver.
Under the MTC, the self-insured excess sits below the minimum limit of indemnity and does not erode it. A firm with the standard minimum limit has that full limit available above its excess. The excess is not carved out of the sum insured; it is an additional retention the firm carries. This is different from arrangements in some markets where a large deductible effectively reduces the cover the insured has paid for.
A central feature is that the insurer must meet a claim in full to the claimant, including the amount that falls within the firm's excess, and then recover the excess from the firm. The claimant is not asked to wait while the firm finds its share, and is not exposed to the risk that the firm cannot pay. The insurer carries the credit risk on the excess, not the client. This ordering is what makes the excess a matter between insurer and firm rather than something a wronged client has to navigate.
As covered in the related entry on defence costs, the MTC restricts the application of the excess to defence costs, so a firm is not required to fund its own defence through the excess before the insurer engages. The insurer runs and pays for the defence, and the excess is dealt with when the claim resolves. This keeps the firm's cash flow intact during what can be a long and expensive process.
Because the excess does not reduce the limit and the insurer fronts claims, the excess is largely a pricing lever. A higher excess usually reduces premium but increases the firm's retained exposure to the frequency of smaller claims. Firms with a stable claims record sometimes accept a higher excess to manage premium, while those in higher-frequency areas of work may prefer a lower retention. The right level is a judgement about the firm's own risk appetite and cash position, and it is one of the points a broker will work through with a firm at renewal. Surveyors face similar excess judgements under a different rulebook - see our surveyors' PI guide. The solicitors' PI insurance guide puts the excess in the context of the wider policy.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.