Insurers planning professional indemnity 'surcharge'
A number of insurers intend to include a ‘surcharge’ in their professional indemnity insurance (PII) premiums this year, partly to highlight the soaring cost of the assigned risks pool, the Gazette has learned.
It is understood that Travelers, among other insurers, is considering adding the charge to quotes to reflect its exposure to claims made against firms in the ARP.
The ARP is the mutual insurer of last resort for firms that cannot obtain PII from commercial insurers, but insurers have to pay out on claims made against ARP firms in proportion to their market share.
According to Solicitors Regulation Authority figures at 14 June, estimated claims against ARP firms in 2008/09 totalled £41m, with £4.5m of premium due, but just £2m of premium paid.
Gary Horswell, managing director of insurance broker Ntegrity, said that insurers are trying to recoup some losses but also ‘emphasise to the profession – particularly because of the anticipated pain for smaller firms – that the ARP in its current form is something insurers feel is unreasonable.’ Travelers declined to comment.
The Association of British Insurers warned firms that renewals this year will be ‘difficult’. A spokesman said: ‘Given the continuing high volume and value of claims, particularly linked to conveyancing and mortgage fraud, and the huge costs of the assigned risks pool, we expect this to be a difficult renewal. We would advise solicitors to get their proposal forms in early.
‘Longer term, we really need to see positive signs of change to make the market more sustainable and robust, and that means improved regulatory action, and giving insurers more leeway to underwrite according to the individual needs of the customer, rather than the one-size-fits-all policy that is currently imposed upon insurers.’
Last month, PII insurer Hiscox, which had a 1.6% market share in 2009/10, said that it will not offer PII in 2010.
Comments
ARP
I suggest all firms join the ARP. It seems you get full cover and don't have to pay even half your premium. You can stay in business for years and do not have to worry about your claims record.
Should this be the insurer of choice?
ARP
I refer to "ex-solicitor"s comments. Clearly this fool has absolutly no idea how the ARP operates. 1. The ARP is an insurer of "last resort" - if cover is available elswhere entry to the ARP may not be allowed.
2 You cannot continue in business "for years" - the length of time you may be in the ARP is 1 year (as from this years renewal) and if you do not find alternative cover you must cease trading - fact.
3 You are obliged and liable for the premium to the ARP in the same way you would be to any other insurer. Its unprofessional comments like this which lead insurers to draw negative conclusions of your profession - and yes they read forums and comments like yours - WISE UP!
I wonder if this is why you are an "ex solicitor"
Well, A Broker should just
Well, A Broker should just not be in this market should he, if it is so onerous?
Obviously he is and therefore making money- and yes solicitors are fools-for putting up with parasitic "professions" making large sums of money from them.
The Licensed Conveyancers don't have the same trouble that solicitors do in getting cover.
ARP
I am a former practising Solicitor. I don't know about Licensed Conveyancers but I do know from what I do now that insurers underwriting Chartered Accountancy practices have greater freedom to underwrite according to individual requirements. It works there and the overalll approach seems very sensible.
My understanding is that less
My understanding is that less than half the premiums that should have been paid for APR cover have been paid (see the article above). I also understand from previous Gazette articles that firms do not close at the end of a year in the pool if they have not found other nsurance. I understand some have remained in the pool for years.
It is something I believe the profession itself want to do something about but the 'powers that be' seem incapable of resolving.
Finally does A Broker not understand irony??
Insurers Opt For Self-Help
It's as plan as a pikestaff that insurers have exhausted their patience with the SRA, the rigidity of the minimum terms, and the number of bad risk firms in the profession who are content to slip quietly into the ARP, with no intention of paying their premiums.
Insurers have decided to perform some Darwinian culling themselves, so it seems.
£41m claims- £2m premiums income. That really says it all.
A Field of Ashes
Not sure total premiums are 2 million. Sounds far too low but the general point is that the insurers, like the hapless law students, were conned by our lazy media into believing that our profession is a field of gold. The gold has been stripped out by successive governments and now we see a field of ashes. Once the lazy media get hold of the real situation our privileges, primarily huge overdrafts ,will evaporate.
Just because there is a claim
Just because there is a claim does not mean that it is valid.
Insurers have a track record of buying off "dodgy" claims because it is financially expedient in the short term to do so.
Naturally, in the long term this just produces more claims-the insurers then blame the solicitors and rack up the premiums!
It is "moral hazard" of the first order that the insurers have indulged in-and like the banks someone else has to pay.
ARP
A Broker should have realised that Ex Solicitor was not being serious. He was highlighting the fact that the profession not only tolerates the uninsurable, but provides them with subidsidised insurance and lets half of them off paying the premiums while they continue to practise negligently.
How this squares with protecting the public escapes me. The rest of the profession is charged a levy (increased insurance costs) to keep in business those who are a menace to the public.