Claims handlers: insurers wary of claims against firms after The Accident Group litigation

Personal injury firms will face close scrutiny from insurers when they come to renew their policies as part of the fall-out from the collapse of claims handler The Accident Group (TAG), a leading broker warned this week.


Martin Ellis, director of Alexander Forbes Professions, said insurers would want to inquire about firms' dealings with claims handlers.


He said: 'This year, we will see more questions asked by insurers regarding a firm's involvement with claims farmers. At the last renewal, we saw a greater appetite [by insurers] for firms with a personal injury bias, only to be faced with the TAG problem shortly after.


'Greater scrutiny of personal injury firms will occur at this year's renewal as a direct result of the TAG issue and firms need to be prepared to answer more questions than usual.'


Solicitor Richard Gerrard, marketing manager at insurer St Paul Travelers, said: 'It is understandable that underwriters might wish to ask about firms' dealings with claims handlers given the difficulties with TAG. That does not mean that there is necessarily a problem, just that there are matters that might need to be disclosed to underwriters.'


Mr Ellis added that insurers' growing realisation of their obligation to meet the costs of a policy excess if a law firm cannot afford to pay it means they are likely to delve deeper into law firms' accounts than in the past. He said: 'Primary insurers are becoming increasingly aware of their exposure should a firm be unable to pay its policy excess.


'As a result, in some cases firms will be required to provide evidence of the financial strength of their balance sheet. Until now insurers have required a declaration of gross fee income only, and utilised this as a factor in their underwriting. I am convinced that insurers will not be prepared to knowingly accept a credit risk and will more and more therefore require a firm's management accounts or similar statement proving its financial position.'


Mike Rendell, founder of insurance broker Rendell & Partners, said: 'Insurers might ask for the report and accounts for LLPs [limited liability partnerships], because if an LLP cannot pay its excess, the insurer will not have the option of going after the individual partners for it.'