A professional indemnity insurer today announced its withdrawal from the solicitors’ market citing ‘unsustainable’ rates offered by competitors.
Elite Insurance also blamed increased likelihood of fraud involving client accounts, and the proposed reforms of the personal injury market for its decision to withdraw.
The unrated firm had accounted for 2.62% of the market share for 2014/15, down from almost 4% of the market the year before. Just 12 firms wrote more business for solicitors’ firms in 2014/15.
Elite, which entered the solicitors’ PII market in 2012, said all existing policies will continue until expiry but that renewal terms will not be offered.
Chief executive Jason Smart (pictured) claimed some rated insurers have reduced premium rates to a level that cannot be sustained.
This has come at a time when law firms face the danger of cyberfraud attacks, which has pushed up the minimum cover required on a policy.
‘We have seen an increasing number of such attacks and feel these are not likely to abate,’ said Smart. ‘The risk is beyond the control of our underwriting team.’
He explained that the government’s plans to increase the small claims limit for personal injury claims, subject to a forthcoming consultation, has also affected the decision.
Smart added: ‘[Reform] will have an adverse effect on our target market of personal injury solicitors.
‘Again, as the minimum terms require a six-year run-off, Elite considers this risk is unsustainable when rates are reducing.’
The potential effects on clients of the small claims increase have been widely discussed, but Elite’s withdrawal is one of the first signs that firms in the sector are feeling significant consequences.
The issue of cybercrime hitting the legal sector has also been widely signalled in the last year, but this is the first public acknowledgement of the dangers faced by insurers in the sector.
The Solicitors Regulation Authority has said in the past that more reports are coming in of firms being contacted by con artists or falling victim to fraud, particularly in the conveyancing sector.
Common tricks include firms receiving calls purporting to be from banks, the interception of emails between firms and clients and fraudsters taking on the name or identity of firms themselves.