The proportion of law firms relying on an unrated insurer for professional indemnity insurance (PII) cover almost doubled last year, a new survey has revealed.
Around 16% of cash-strapped practices – including almost a quarter of sole practitioners – ignored warnings about unrated insurers as they sought cheaper deals. In comparison, in 2011/12 just 9% were prepared to use unrated insurers.
The figures come from a survey of more than 600 firms by the Law Society. The Society said it was concerning to see an increase in firms relying on unrated insurers in a year when availability had increased.
It warned firms last year to check insurer solvency following the financial collapse of two insurers, Quinn and Lemma.
Law Society chief executive Desmond Hudson said: ‘Smaller firms need to make much better use of their available market and they need to obtain quotations from all insurers willing to offer cover.
‘They should then assess these quotations based on a range of factors, including the insurer’s financial security rating. This is not a purchasing decision that should be made solely on price.’
The survey revealed that in more than a quarter of PII applications, firms did not know the level of access their broker had to insurers. While larger firms asked brokers which insurers they worked with, there was confusion among smaller firms about which brokers were ‘tied’ to a particular insurer.
Median premiums fell by more than £4,000 last year, with smaller firms seeing the biggest decrease in cost.
Sole practitioners paid an average of £5,743 last year; firms with two to four partners £45,000; five to 10 partner firms paid £71,600; and firms with up to 25 partners paid £132,424.