The single renewal date for solicitors’ professional indemnity insurance (PII) should be binned to help drive down rates, a report commissioned the Solicitors Regulation Authority has concluded.
The SRA commissioned consultants Charles River Associates (CRA) to examine opportunities to reform the market after insurers participating in the sector warned of huge rate hikes (13 September 2010).
The wide-ranging report makes a number of recommendations including that the 1 October renewal date should be dropped to push down the number of firms covered by the assigned risks pool (ARP), the insurer of last resort.
The SRA has so far resisted calls for the ARP to be closed and the report states that it should remain open because it is more economic than the previous regime.
However, it proposes that firms participating should be underwritten on an individual basis rather than being forced to pay a punitive premium. ARP firms failing to pay their premium should be closed down.
The Association of British Insurers has led the campaign for reform of the PI market after its members complained that the sector was becoming uneconomical.
Kate Carr, the ABI’s assistant director of markets and regulation, said: “This market cannot tolerate periodic crises, caused by a combination of poorly enforced regulation and restrictive policy requirements, such as insurers’ requirement to stay on cover when premiums aren’t maintained, and exacerbated by significant increases in claims in recent years.
“We hope this report will spur the legal profession into working with us to ensure that these overdue and urgent changes can be introduced to bring stability and sustainability back to this market.”
Any changes, if implemented by the DSRA, will come into force before the October 2012 renewal date.