Underwriters for the professional indemnity insurance industry have recently warned that the 2010 renewal season will be an unpleasant experience for smaller firms and businesses.
The last time the market for professional liability insurance retracted, businesses experienced insurance rate increases of almost 40 per cent after renewal. Smaller businesses are being predicted to be hit particularly hard as the larger insurance providers shift their focus to larger corporations, resulting in inflated premiums for smaller companies.
The underwriters, who are affiliated with the Association of British Insurers, have called for reforms to the operations of the business liability insurance market. They have appealed directly to the Solicitors Regulation Authority in a request to give encouragement to a broader base for competition throughout the industry.
In response, the SRA has begun cracking down on any firm found to be participating in the last resort insurance of the assigned risk pool. The ARP is directly funded by insurance providers that are responsible for underwriting the profession directly.
Lockton International recently released a PI Special Report in which the insurance broker’s executive director of risk solutions and professions practice Steve Holland provided an overall evaluation of the industry. Phillip Murrin and Edward Coulson, partners at Davies Arnold Cooper, conduct an examination of the difficulties that need to be overcome in the professional indemnity market, while Susan Dingwall, a partner with Norton Rose, examines the issue from the perspective of the kinds of challenges faced by firms.
This year has seen a number of highly significant changes to the professional indemnity insurance market. Claims have risen, the ARP has caused countless problems, returns on investments have diminished steadily, and the departure of major players in the PI insurance industry have all converged to create a perfect storm of rising insurance rate premiums. Most estimates are anticipating that rates will go up as much as 10 per cent higher than their already historically high rates brought about by the large increase in 2009. A large number of firms are expected to face a struggle to procure affordable insurance, according to the report.