Qualifying solicitor’s professional indemnity insurance providers will need to pay £38.6 million in order to maintain funding for the Assigned Risks Pool for 2011, according to the Solicitor’s Regulation Authority.
A temporary insurance fund of last resort for solicitor firms unable to secure commercial insurance cover, the ARP has been facing a shortfall due to a lack of sufficient premiums to pay any professional liability insurance claims that will be brought against firms during the 2011-2012 financial year.
The new legal bill comes on the heels of the SRA’s announcement that the ARP will undergo several changes in the immediate future. The fund is scheduled to be completely dismantled from October of 2013, said the SRA.
The ARP is poised to be replaced by a new system wherein insurers will find it compulsory to offer three month extended policy terms to solicitor firms who have found it impossible to obtain professional indemnity insurance for the coming year.
The Association of British Insurers has been highly critical of the SRA decision, calling it an unfortunately missed opportunity.
The firm that is responsible for the management of the ARP on behalf of the SRA, Capita, recently confirmed that the cash call had gone out to solicitor firms.
Industry experts agree that maintaining a professional indemnity insurance policy is not just a good idea because it’s mandated by law for many business sectors but also because it offers protection in the event of a lawsuit being brought against solicitor firms.
Many small and medium sized firms are especially vulnerable to an expensive legal proceeding that could result in the shuttering of their businesses if they lose their claim – something professional indemnity insurance would protect them from.