Insurer pulls out of PII market citing dangers of cybercrime

Topics: Personal injury & clinical negligence,PII

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  • Jason Smart

A professional indemnity insurer today announced its withdrawal from the solicitors’ market citing ‘unsustainable’ rates offered by competitors.

Elite Insurance also blamed increased likelihood of fraud involving client accounts, and the proposed reforms of the personal injury market for its decision to withdraw.

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The unrated firm had accounted for 2.62% of the market share for 2014/15, down from almost 4% of the market the year before. Just 12 firms wrote more business for solicitors’ firms in 2014/15.

Elite, which entered the solicitors’ PII market in 2012, said all existing policies will continue until expiry but that renewal terms will not be offered.

Chief executive Jason Smart (pictured) claimed some rated insurers have reduced premium rates to a level that cannot be sustained.

This has come at a time when law firms face the danger of cyberfraud attacks, which has pushed up the minimum cover required on a policy.

‘We have seen an increasing number of such attacks and feel these are not likely to abate,’ said Smart. ‘The risk is beyond the control of our underwriting team.’

He explained that the government’s plans to increase the small claims limit for personal injury claims, subject to a forthcoming consultation, has also affected the decision.

Smart added: ‘[Reform] will have an adverse effect on our target market of personal injury solicitors.

‘Again, as the minimum terms require a six-year run-off, Elite considers this risk is unsustainable when rates are reducing.’

The potential effects on clients of the small claims increase have been widely discussed, but Elite’s withdrawal is one of the first signs that firms in the sector are feeling significant consequences.

The issue of cybercrime hitting the legal sector has also been widely signalled in the last year, but this is the first public acknowledgement of the dangers faced by insurers in the sector.

The Solicitors Regulation Authority has said in the past that more reports are coming in of firms being contacted by con artists or falling victim to fraud, particularly in the conveyancing sector.

Common tricks include firms receiving calls purporting to be from banks, the interception of emails between firms and clients and fraudsters taking on the name or identity of firms themselves.

Readers' comments (24)

  • Errrm... I recall Zurich at the tail end of last year commenting that Sep Rep for Conveyancing should be the norm, as one of the things it reduces, is the risk of mortgage fraud...strangely enough their comments fell on stoney ground because of the many vested interests in ensuring Sep Rep does not come in and that solicitors can continue to be shafted by anyone and everyone at every opportunity.

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  • I just won't act for lenders in any transaction and if that means the client goes elsewhere then so be it. I am well rid of them.

    I have removed the risk from my practice. Let the lenders panel solicitors act for the lender in the transaction and shoulder all the risk as whilst I have a record of no claims, I cannot see a buyer making a future claim - only a lender!

    I am getting paid the same for doing less, without the risk and enjoying reduced PII premiums from my insurer who thinks it a great idea. Screw what TLS think or say!!

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  • ‘The risk is beyond the control of our underwriting team.’ What's that supposed to mean? All risks are beyond the control of the underwriting team. As for cyberattacks, how many have occurred and how many claims have resulted from them? Sounds to me like Elite just don't want to be writing these lines any more.

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  • I suspect that Elite see lots of PI firms going into run off over the next few years and don’t want to be the last insurer required to provide run off cover.

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  • Elite don't actually do a lot of the underwriting - its done under a binding authority with a firm called Inperio who take a hefty chink in commission, profit share etc.
    elite had a few Friday afternoon fraud claims that costs them a lot of money and given that the rated insurers dropped their pricing last year it was only a matter of time before they pulled the plug.
    at my firm of brokers, we were saying that this would be Elite's last year in the solicitors PII arena

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  • Anon @ 5:53 yep, that's a pretty good call, it will be interesting to see how many u/w are offering an aggregate this year, particularly in PI

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  • Firms should take out cyber liability insurance to protect them

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  • But is a bank "vishing" scam, involving only the use of a telephone, a cyber risk? These have been used in the UK to raise money for terrorism in Syria and Iraq according to the Financial Action Task Force report in October 2015. So will a terrorism exclusion in some policies apply? See my article, Should we buy cyber insurance? http://goo.gl/jeIGx6

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  • Are we, or at least have we become, uninsurable?

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  • If people don't become more aware of cyber risk, we could. Transferring the problem from PII to Cyber policies can only be a short term fix as insurers won't wear systemic losses indefinitely.

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