Insurers cover their backs with huge PI rises for solicitors
The mortgage fraud that swept the country 20 years ago is resurfacing. Rather than crooks, small legal firms with large conferencing books are being punished – with eyewatering PI hikes.
Small legal firms claims they’re being punished unfairly, and even, being driven out of business. So what’s the rationale behind the hikes and where is it all leading to?
The message from brokers and insurers is clear – it’s not particularly lucrative business and we have to protect ourselves from claims.
Look back nine years ago, and you’ll see what happens if the charges on premium aren’t right. Back then the Solicitors Indemnity Fund (SIF) was a mutual for solicitors.
But it collapsed in 2000, with a large deficit, leaving solicitors to turn to the commercial market. So if you don't set the premiums right, then that is what happens, insurers say.
The Solicitors Regulation Authority (SRA), never one to give away too much, seems to tacitly agree.
In a statement to Insurance Times, the SRA said: "We anticipate that there will be some upward pressure on premiums this year but the picture will not be uniform across the whole profession. While we enter into an agreement with each of the 26 Qualifying Insurers the market itself is regulated by the Financial Services Authority (FSA).
“The insurance rates quoted are a matter for individual insurers and are dependent on current market forces, unlike the situation which previously operated under the single Solicitors’ Indemnity Fund which ceased in 2000.”
The end result, is that the assigned risk pool (ARP) – effectively a dumping ground for solicitors unable to get insurance before the October deadline – is likely to swell again.
146 law firms were placed in the ARP in 2008, up from 100 legal practices in 2007. This year it’s likely smash the 200 barrier.
