My firm is caught up in the Balva professional indemnity insurance fiasco. Last year, on the broker’s recommendation, I took out a two-year policy with Balva, expiring on 30 September 2014. Nothing was said about the company being ‘unrated’ or what the risks of that might be.
Balva was on the Solicitors Regulation Authority’s list of approved insurers. As solicitors, we are not experts in finance; indeed, the majority of our profession is not authorised in any way to conduct financial services work. Therefore, we are just like any other customer on the street looking for insurance cover. On expert advice, the Balva two-year policy seemed like a sensible choice and good budgeting.
Balva went into administration earlier in the year and its national financial regulator stopped it writing new business. After a great deal of confusion, the SRA has finally advised that those of us with two-year policies can rely on them as rule-compliant after the end of September 2013. However, if Balva suffers any ‘bankruptcy event’, the policies will no longer qualify and we will have to obtain replacement cover within four weeks. The received wisdom is that Balva’s liquidation is more likely than not within the next few months. ‘You may like to obtain alternative cover now’, the SRA advises.
But who will give cover? Brokers say they cannot get a response from any of the underwriters they have tried, probably because they are not interested in small firms, and are at a loss how to advise. Other brokers are not replying, having solicited my business only a week earlier. The word is that the insurance market is moving away from firms with fewer than four partners. Assuming that underwriters who are not interested now will remain uninterested for the rest of the coming insurance year, my colleagues and I face the risk of becoming unemployed on no more than four weeks’ notice at any time in the next 12 months, because I will have to close the practice if I cannot get new cover.
If what the brokers tell me is right, firms like mine are on the point of extinction. Yet we are not an irresponsible firm. In the 37 years since I qualified, I have never had a claim against my own work, and there has been nothing against any firm of mine for more than 25 years. We are set up with minimal overheads and we work in limited fields, none of them high-risk. We serve clients who still want to deal with somebody they can relate to as individuals and who appreciate home visits. We provide a real service to the public for a modest profit. Yet we are being driven to the wall, not for any fault of our own but to suit the insurance industry’s own profit motive. Over 1,000 established private clients will have to look elsewhere for the services we have been providing.
Thirteen years ago, under pressure from large commercial firms who felt they were being over-charged, the Law Society’s council decided to wind down the Solicitors Indemnity Fund and to require firms to find insurance on the market. Yet the need for such a mutual fund is greater now than ever, unless the profession is content to be eviscerated by greed for profit from outside the profession. Responsible leadership would create a new mutual fund and require every solicitors’ practice (including multi-disciplinary practices) to subscribe to it.
Big firms will object, which raises the question: are solicitors still a profession serving the public, or are we now just another ‘industry’, in it for our own individual interests and ‘devil take the hindmost’?
Kevin Beach, Beach Law, Old Coulsdon, Surrey