Professional indemnity insurance 11 per cent less costly this year

Newly released official figures have shown that professional indemnity insurance turned out to be 11 per cent less costly to solicitors this year.

The 2010 professional liability insurance market cost for providing cover to the legal profession tallied up at £214 million, both lower than the last two cycles; the previous year saw costs of £241 million, and 2008’s total costs were £226 million.  Despite reports from some solicitors that they faced large increases to their premiums and market conditions that were exceptionally difficult, the overall reduction still occurred, the figures indicate.

Business liability insurance industry experts have made the suggestion that a shrinking of the premium pot occurred due to their desires to reduce how exposed they were to the assigned risks pool, the insurer of last resort for the solicitor market.  Insurers accomplished this by rearranging their premiums so that compulsory cover for large law firms became less expensive while additional cover premiums became more expensive.  As insurers are required to pay for claims that are made by solicitors who make use of the ARP on a sliding scale according to their compulsory cover market share, the new arrangements could be a win-win for both insurer and customer.

Of course, costs may also be lessened due to the shuttering of some firms because of premiums that were simply prohibitively expensive.

Some industry experts have expressed mixed reactions to the so-called “premium flipping” that insurers engaged in to reduce their share of ARP responsibility.  One Liverpool legal partner stated that despite the legitimate nature of the practice, premium flipping can be seen as a kind of ploy. Another industry insider however claimed that costs would have been as much as 15 per cent higher for 2010 had insurers now flipped their premiums.

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