The Solicitors’ Indemnity Fund (SIF) is to become an insurance claims-handling provider in an effort to keep insurance rates down.
Legal & Professional Claims (LPC) will be launched in June as a specialist professional indemnity (PI) claims company owned by the Law Society.
The SIF, which was established to provide PI cover to all solicitors, was closed in 2000 with a surplus of £100m.
Half of that money was handed back to the Law Society and the remainder returned to firms.
The fund will be closed within five years after a small team finalises any outstanding claims against it.
The company will now be transformed into LPC to help ward off the impending PI rating correction that insurance experts predict will hit the profession within two years. LPC chief executive George Raubenheimer said: “The market is flat but that will change. Everybody needs to be alive to the fact that the professional indemnity market is turbulent – particularly in this economy. The Assigned Risk Pool (ARP) shows that rates are unsustainable.”
He continued: “By helping to create more choice and making our services available to the market, any new entrant will have that economy of scale and can help keep rates down.”
The move has drawn criticism from some firms acting as claims-handlers. One insurance lawyer said: “It’s quite strange and wrong that our own representative body is competing against us – there are several firms already doing this work.”
Insurance is the third biggest overhead for firms after staff costs and property. Rates are expected to rise by up to 25 per cent within two years.