Lexon Insurance has introduced a revamped levy model, in line with its partnership with Queensland Law Society, which has delivered several benefits.
The benefits include:
- The introduction of a no claims discount which benefited more than 87 per cent of eligible practices;
- The introduction of a claims loading cap which benefitted more than half of the practices with a claims loading;
- More than 97 per cent of practices paying less than what they would have under the previous model (i.e. with this year’s Gross Fee Income (GFI) and claims information).
The key elements of the 2024/25 model are:
Base Levy: Practices are rated on their GFI as a measure of the workflow and size of the practice. A sliding percentage rate of GFI is charged according to an incremental scale.
No Claims Discount (NCD): A new initiative in 2024/25, the NCD is a 7.5 per cent discount off the base levy otherwise payable which acknowledges the good claims performance of law practices:
- without a claim for which indemnity has been granted in the relevant five-year claims loading period; and
- which started before 1 July 2023.
More than 87 per cent of eligible practices received this discount in 2024/25.
Claims Loading – Introduction of a Cap: Under the GFI model, a claims loading levy may attach to a practice based upon the “loss ratio” of that practice. The loss ratio compares the claims history (including reserved claims) of each practice as against the levy collected. This is carried out over a five-year period to reduce the impact on practices of “one off” claims. The mere notification of circumstances which may give rise to a claim is not included in these calculations.
Further, the fact that a practice may make a claim on the scheme will not automatically lead to a claims loading – this will only occur where the loss ratio exceeds 60 per cent. A further initiative for 2024/25 was the introduction of a Claims Loading Cap so that the claims loading applied cannot exceed four per cent of the incurred claims value. This cap seeks to reduce the maximum amount recovered via this loading to about 20 per cent of the net value of the claim. More than 50 per cent of practices with a claims loading benefitted from this new Claims Loading Cap.
Enhanced Management Review (EMR) Program: As an effective risk-management tool, Lexon’s EMR Program recognises the value of periodic file reviews. Aside from the peace of mind delivered by adhering to some best practice risk management strategies, participating practices receive an EMR Program 15 per cent discount on their base levy (with a minimum discount for small practices of $1000 and a maximum discount capped at $40,000).
The pricing outcomes have been made possible by the hard work of the profession to improve its risk resilience. Over time the partnership between Lexon and the profession has seen material improvements in claims frequencies and values.
While professional practice can never be guaranteed error free, the implementation of workshops, risk tools and other initiatives have coincided with a marked decrease in the expected yearly number of insurance files by 32.4 per cent since 2002/3. With a growing profession, this means the frequency per solicitor has also decreased almost 70 per cent in the same period.
To help the profession maintain these low claim rates, there are active use risk tools that have been shown to significantly reduce claims. These risk tools are free for Lexon-insured practices. You can find a list of claim-reducing risk tools here.
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