The Leader Column

Beware the apathy. Last year, it was only a surprisingly generous Law Society that saved a raft of firms, both large and small, from punitive premiums on their professional indemnity (PI) insurance, as it moved from the Solicitors Indemnity Fund (Sif) to the open market.`The Law Society allowed firms that missed the 1 September deadline to backdate their cover, even into November. Such firms thus avoided the punitive premiums – 25 per cent of fee income – charged in the Assigned Risks Pool, but there will not be the same leniency this time around.`To make matters worse, it is proving intransigent on changing the single renewal date, which would help alleviate congestion in August. Many firms, insurers and brokers are keen to spread the renewal dates – not surprising given that last year it was not uncommon for underwriters to deal with as many as 14,000 inquiries in just six weeks.`The fact that there is a firm out there facing a claim of up to £3bn illustrates the importance of getting your PI cover sorted sooner rather than later.`So what can firms expect this time around? There are about nine insurers sharing the bulk of the market. St Paul International Insurance Company obviously dominates with an estimated 25 per cent of the market. Zurich Professional and QBE Insurance Group follow with somewhere in the region of £20-£25m each, while CGNU, Ace Insurance, Royal & SunAlliance, Saturn Professional Risks, Cox Syndicate Management and AIG Europe are understood to be picking up about £10m each.`These all sound like healthy sums but the value of the market has plummeted £100m from its final year under the control of Sif, when it was estimated to be worth £250m. Insurers have been accused of drastically undervaluing the market but argue that in 1999-2000 Sif had to deal with a whole manner of issues including Sif reinsurance, Y2K and shortfall contributions, all of which pushed the market artificially high.`Despite these claims it seems inevitable that premiums will increase, with one insurer understood to be about to increase its premiums by as much as 20 per cent. Others are likely to see a rise of closer to 10 per cent, while one is freezing an increase for existing clients but charging any new ones 10 per cent extra.`So while you may be happy with the relationship with your existing insurer, it is still worth shopping around – just don’t leave it too late.`Matheu Swallow, associate editor matheu@thelawyer.co.uk