According to recent research conducted on its behalf, the Solicitors Regulation Authority is now calling for the professional indemnity insurance single renewal date to be binned in an effort to drive down the cost of insurance rates.
After business liability insurance providers warned that massive rate hikes were imminent, the SRA decided to commission Charles River Associates to make a thorough examination of ways to reform the insurance market.
The report CRA submitted back makes a wide range of recommendations to the professional liability insurance market. One such recommended change the consultancy firm highlighted was the dropping of the October 1 renewal date. Doing so, CRA claims, would work to decrease the number of solicitor firms having to enroll in the market’s insurer of last resort, the assigned risks pool.
So far, the SRA has resisted closing the ARP. The report echoes this sentiment: leaving the ARP open would prove a more economically-sound strategy than the regime employed previously.
The recommended change that the research results proposed was to underwrite participating firms individually instead of forcing them to pay a premium that many see as punitive. Any firms that would fail to pay their premium would face being shuttered as a result.
After many of its members lodged complaints that the professional indemnity insurance market was quickly running the risk of becoming uneconomical, the Association of British Insurers has spearheaded the reform campaign for the market.
ABI’s Markets and regulation assistant director Kate Carr, stated that the market was intolerant of any crises that might periodically occur due to a deadly mixture of policy requirements that were too restrictive and regulation that was enforced poorly, if at all. The significant claim increases the market has been experiencing lately have only mate matters worse, Ms Carr added.
The assistant director hopes that the new report will inspire the legal profession into collaborating with insurance companies to bring more sustainable and stable practises back to the professional indemnity insurance market.