Indemnity quotes cause confusion

By Sue Allen

Widespread confusion among insurers who are inexperienced in the solicitors professional indemnity market has led to huge variations in quotations for insurance premiums, brokers have revealed.

Brokers also warned that firms could find themselves consigned to the punitively expensive assigned risks pool (ARP) by default if they have failed to secure insurance, due to a 'log-jam' of work among insurers.

Michael Rendell, director of brokers PYV, said there were anomalous prices and widely varying premiums for the same risk: 'From the solicitor's perspective, the market is in complete chaos.'

Charles England, director of professional indemnity at HSBC Insurance Brokers, said one firm with gross fees of 1.5 million and a poor claims record had been quoted premiums ranging from 44,000 to 115,000 on the same risk.

He added that it was proving difficult for insurers to 'pick the right price' because they had no experience of claims themselves.

Kelvin Curran, director of Lloyd's brokers FirstCity, said the levels of variation between quotes was 'strange to say the least' and due to a lack of experience in the market.

As examples, he quoted one firm with gross fees of 2.6 million which had been quoted premiums ranging from 50,000 to 129,000 on the same information.

Another firm with gross fees of just over 12 million had received two quotes of 190,000 and 250,000.Mr Curran also warned that firms were 'fast running out of time' if they had not yet finalised their insurance.

Requests for quotes would go to the end of the queue which was already log-jammed.

Alison Crawley, the Law Society's head of professional ethics, said: 'Even if firms go into the ARP for a short time before getting commercial insurance, they will probably have to disclose that in future, which could affect their premiums.'

Eastgate Insurance Services has been appointed manager of the ARP.

Premiums for firms entering the ARP will be 25% of gross fee incomes for the first 0.5 million of fees, with percentages banded thereafter.

Meanwhile, Hammonds Suddards Edge has entered a joint venture, Solicitors Practice Protection, with approved insurer Ace Global Markets to offer solicitors a dedicated professional indemnity claims handling service.

Solicitors from the firm will run a claims hotline.

They will also deal with claims and provide firms with risk management advice.

Brokers and risk management firm Marsh last week announced the launch of a transactional Web site to allow firms to receive quotes and binding cover on-line.

For details contact www.efinpro.co.uk or tel: 0870 9000 933.