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Small firms suffer as legal insurers refuse to underwrite in current climate

Professional Indemnity The factors behind the dramatic premium increase for the 2008 Solicitors PII have been brewing for many years - in fact, ever since the cessation of the SIF in 2000. It comes as no surprise as PI claims have continuosly & increasingly exceeded premium every year (the reason why the SIF hung up its boots). As a result, every year as we approached the Solicitors PII renewal "season", there were increasing calls for premium rate increases. No heed was paid & instead we had declining rates - thus, it is hardly surprising the screw has turned; delay has made the adjustment that much more painful. Instead of this being managed properly with incremental increases each year, the portends were ignored until this year when the pressure reached bursting point. This was not been helped by more examples of poor management - your article is quite correct that insurers have left declinatures of existing cases until too late for many firms to find alternative cover before the 1.10.08 deadline. Thus, they had to take an involuntary & ill deserved dip in the Assigned Risks Pool ("ARP") until they can get open market cover; this will place an unwanted taint on their record for renewal in 2009 & beyond. The ARP was originally intended as a holding ground for the "bad boy" practitioners or firms, whose record was just too bad for the open market to enable them to mend their ways or be closed down after two years. Many small firms who have been priced out of their PII simply do not deserve this treatment. Your article correctly stated that the number of PI insurers authorised by the SRA available to smaller firms is very small. There are 26 insurers authorised by the SRA but as a significant number cherry pick the big premiums from larger practices to leave only a handful of insurers willing to offer terms to smaller firms or sole practitioners. To cap it all, the 1st October common renewal date causes chaos, not helped by the firms who every year leave their renewal until the last minute - be it due to pressure of work or poor management. Consider for a moment: there are about 10,000 firms, each of who will seek at least 3 or 4 quotes through 2 or 3 brokers - this is about 100,000 enquiries which only 26 SRA authorised insurers have to handle in the space of 8 weeks. It gets worse: firms of 4 partners or less constitute about 90% of firms in England & Wales - as discussed above, this market is handled by about 6 insurers, who thus have to cope with about 90,000 requests for quotes. This is a total log jam for brokers & insurers as they cannot devote enough time to each case and can only cope with sausage machine methods. As in the rest of the insurance market, if Solicitors PII were to have renewal dates throughout the insurance year, proper consideration could be given to each case. No other profession operates such a dickensian system and it must be abandoned before even more harm is done to small to medium firms, who are the vast majority of practices in England & Wales and are the legal lifeline for the majority of ordinary people.

9-Oct-2008

1:38 pm