Soliciting change

In one month, the state of the solicitors’ private indemnity market should become clearer.

With the 1 October renewal date fast approaching the winners and losers in the intensely competitive market will be crowned.

Companies, such as Hiscox, that have held firm on decisions to raise rates, despite the industry trend to undersell the product, may find it is no longer worth trying to maintain a presence in the market, particularly if so-called loyal clients seek policies in greener (and cheaper) pastures.

Hiscox raised its premiums several years ago, claiming the market average was inadequate. The move cost about £300,000 worth of business and plunged its market share from 8% to 0.1%.

The company was left with 160 law firm clients but how many of those it will retain come 1 October has yet to be seen.

Gary Head, director professions & specialty commercial division says: “We don’t know how many of them we will hold on to.”

Hiscox is willing to let firms walk if they opt for cheaper coverage with another company.

At the cost of losing business, Hiscox is letting its underwriting determine the rates, not its competition.

Instead, the company is setting its sights on what it claims are more profitable areas in the professional indemnity market such as IT operations, charities and naturopathic medicine.

Yet other insurers such as Royal & Sun Alliance are willing to rise to the challenge within the solicitors’ PI market, claiming a desire to write more business but on a bespoke basis to ensure adequate rates.

During last year’s renewal season, solicitors’ PI premiums fell by nearly 15%.

In 2000, when solicitors’ PI was opened to the insurance market from the solicitors’ indemnity fund (SIF), contributions were £250m.

Last year, the amount collected by the open market was £210m, this despite solicitors taking on 70% more work per year, according to Head. This figure should be £400m to £500m.

We will have to wait until October to see if the market agrees.