Professional indemnity (PI) insurers are drawing up a special questionnaire designed to weed out high-risk law firms ahead of the renewals season, the Gazette has learned.

Aimed primarily at conveyancing practices, questions will focus on each firm’s history of property deals – which could stretch as far back as six years. Training given to staff on dealing with fraud and money laundering, firms’ management structures and billing systems will also be scrutinised, according to Frank Maher, partner at Liverpool firm Legal Risk.

At the same time, Zurich, the largest PI insurer, told the Gazette that premiums could rise by as much as 25%. The insurer is in the process of considering such a questionnaire.

Zurich has also started to receive notifications of potential claims against solicitors at a rate comparable to that of the financial crisis in the early 1990s, according to business development manager James Jack.

He said: ‘Solicitors will find themselves in the line of fire. The slowdown in the housing market reveals mistakes that were made during the good times. Property investors are making less money, so they start to look around for people who may have misadvised them.’

Maher said the answers a firm gives to the questionnaire might trigger an increase in premiums, or even denial of cover – ultimately raising the possibility that firms could be forced into the assigned risks pool. The assigned risks pool insures firms unable to gain PI insurance from the 22 qualifying insurers but at a far higher premium.

He said firms with property practices should look to renew as early as possible because insurers would be looking for ‘a lot more detail’ than previously. ‘[Law firms] won’t want to get into the situation some did last year, where they submitted their renewal two weeks before the deadline, but insurers declined to offer cover.’

Travelers, one of the largest PI insurers, recently announced that premiums were set to rise with conveyancing firms set to suffer the biggest hike (see [Gazette], 2008, 12 June, 5).