One of the UK’s biggest building society groups has barred firms with unrated insurers from its panel, the Gazette can reveal.
The Gazette understands the Yorkshire Building Society Group decided at the start of this year to restrict membership to law firms covered by rated providers.
Those excluded include firms that have been on the group’s panel for up to 20 years. The building society is in the process of informing all those involved.
The exclusion comes as the SRA considers whether to ban unrated insurers from the solicitors PII market – a move which could enhance client protection but force up costs for law firms.
Wayne Roberts, director of Cheshire firm Roberts Crossley, said his firm stands to lose up to 15% of its fee income from the building society’s decision.
Roberts says his firm was asked at the start of this month for proof of cover with an indemnity limit of £3m. When Roberts replied with the details of a policy with Alpha Insurance, Yorkshire responded to say the firm had been removed because Alpha is unrated.
Roberts told the Gazette: ‘I asked if they could delay the policy until 1 October 2014 to give us the opportunity to go with a rated insurer next year but was told they have no discretion in the matter. Obviously if other lenders follow this policy then conveyancers will have to insure with rated insurers, whatever the cost, despite what decision the SRA may make.’
Roberts, whose firm is part of the QualitySolicitors network and mostly deals with conveyancing, said his firm has been on Yorkshire’s panel for 10 years and has had no complaints from any of the building society’s customers. It is also a member of the Conveyancing Quality Scheme.
Yorkshire Building Society Group is the second biggest in the country with pre-tax profits in 2012 of £157m. The group includes Chelsea Building Society, Norwich and Peterborough Building Society and Barnsley Building Society. It was unable to respond to the Gazette’s request for a comment yesterday.
Last week the Gazette revealed Elite Insurance, one of the biggest unrated PII providers in the solicitors market, may not be able to secure a rating before 1 October, with chief executive Jason Smart warning prices will have to rise to cover the cost of the application.
The Law Society has said that attempts to impose a minimum financial strength rating for professional indemnity insurers will stifle competition and put small law firms at risk.
A Yorkshire Building Society spokesperson said: 'Professional indemnity insurance (PII) is an important part of the package of measures we use in order to ensure that we do not place ourselves at undue risk.
'Following the recent financial collapses of PII providers Quinn and Lemma, we decided to require all applicants to our conveyancing panel who take out insurance on the open market to have PII cover with an insurer with a minimum financial security rating of AM Best B+ or Standard and Poor’s A.
'We are also contacting existing panel members to explain that with effect from 1 October 2014, we will require their insurer to meet this requirement in order to remain on our panel. We are not actively removing existing firms from the panel prior to 1 October, unless they need to reapply for membership and are not insured appropriately.'