Solicitors paid 11% less to insurers for professional indemnity insurance (PII) this year, official figures have revealed.

The cost of insuring the profession on the open market in 2010 was £214m, down from £241m in 2009 and £226m in 2008. The fall occurred despite some solicitors again reporting large premium increases and exceptionally difficult market conditions.

Experts suggested that the premium pot shrank because insurers wanted to reduce their exposure to the assigned risks pool (ARP) and did this by ‘flipping’ premiums – reducing the amount they charged large law firms for compulsory cover, while simultaneously increasing premiums for additional cover. Insurers are liable to pay for claims made by firms in the ARP in proportion to their share of the compulsory cover market.

The total cost may also have fallen because some firms shut down rather than pay higher premiums.

Frank Maher, partner at Liverpool firm Legal Risk, said that while the practice of flipping premiums is legitimate, it might be perceived as ‘a bit of a [ploy]’. Another expert suggested that, if insurers had not flipped premiums for larger firms, the cost of insuring the profession would have risen by up to 15%.

Chartis Insurance, formerly AIG, increased its share of the market, taking over 18% of premiums compared with 15.2% in 2009. Inter Hannover, which entered the market last year, increased its share to 14.4%, up from 4.5%. XL Insurance, another new entrant in 2009, increased its share to 13.3% from 7.1%.