Hiked premiums, fewer indemnity insurance providers
Solicitors face a tough indemnity insurance market this year and should look for renewed cover as soon as possible, the Law Society has warned.
The society updated its practice note on professional indemnity insurance (PII) last week to highlight anticipated problems and offer solicitors guidance on how to find the best deal before the 1 October deadline. It warns the market has hardened due to:
l some qualifying insurers exiting the market;
l some insurers narrowing the types of firms offered cover;
l the collapse of the housing market and an increase in mortgage-related fraud leading to concerns among insurers about an imminent increase in conveyancing-related claims; and
l an increase in the amount and value of claims insurers are receiving.
Insurers are scrutinising forms more carefully and being more selective, the practice note warns. Some law firms have had to accept “significantly increased premiums” or have been unable to obtain cover. According to the practice note, “even firms with a clean claims history have experienced difficulties”.
Sole practitioners, firms with fewer than five partners, and firms that perform conveyancing work are among the most affected.
Frank Maher, partner at Legal Risk solicitors, which advises law firms on risk management, says: “It’s highly likely that a significant number of firms won’t get cover or won’t be able to afford it.
“Getting your proposal form in doesn’t mean you’ll get taken on. It’ll be more chaotic this time than last year, particularly at the smaller end of the market.
“Larger firms will find cover, although those that have had claims problems may face a premium hike.”
The society advises that firms should have begun their renewal process by May, and warns that, if claims increase this year, insurers will increase their premiums to recoup their losses. The practice note offers guidance on applying for PII from the assigned risks pool.
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