Firms 'face financial strain' if indemnity renewal date is changed, warns Zurich

INSURANCE: proposal to switch deadline to 1 October would mean paying for more cover

The largest underwriter in the legal indemnity market - Zurich Professional - is fighting moves to change the renewal date for professional indemnity insurance from September to October, saying it will put a strain on some law firms' budgets.

Solicitors should have indemnity policies in place by 1 September, but this causes trouble for firms seeking to shop around for new policies, as key personnel are often away over the summer.

After requests from solicitors and brokers, the Law Society's indemnity insurance committee has proposed that the date be changed to 1 October.

The Society's council will debate the issue this week.

But a statement from Zurich - which has 21.6% of the market for the compulsory layer - said the change would put more pressure on firms because they would need to pay the equivalent of an extra month's cover with their policy payment this year as the transitional 2003/4 indemnity period would be 13 months.

David Coughlan, head of Zurich Professional, said: 'This proposed change will create additional strains on firms' budgets.

Well-organised firms are properly prepared and have no problems under the current system.

The proposed change has no benefit to the legal profession and puts extra financial pressure on firms at a time when professional indemnity rates are still hardening.'

Peter Farthing, a partner with City firm Clyde & Co and chairman of the Law Society's indemnity insurance committee, said: 'This change has been widely demanded.

It is supported by all underwriters with the exception of Zurich.'

Nick Pointon, group development director of insurers PYV, said: 'October renewals will ease the problem of preparing substantial questionnaires in the August holiday season.'

Nonetheless, he said PYV would like to see staggered renewal dates, enabling firms to renew their policies throughout the year.

The committee decided that rolling renewals could cause problems unless combined with a rolling practising year as solicitors would otherwise be able to apply for a practising certificate with just one month of insurance left on their indemnity period, meaning it could be 11 months before the Society checked again for the existence of insurance.

Meanwhile, PYV is predicting a 50% hike this year in the cost to solicitors of top-up cover above the 1 million compulsory level because of a 'dramatic rise' in claims over the past three years.

Jeremy Fleming