Indemnity insurance market lobbying for radical reforms

The indemnity insurance market has been lobbying for radical reforms to professional liability insurance for solicitor firms, claiming that the current methods are unnecessarily escalating the cost of cover for all solicitor firms.

The total business liability insurance premium pot for solicitor firms raised by 20 per cent between the years of 2007 and 2009, to a record high of £245 million, according to official figures.  This increase was due to insurers declining to write new book and reducing their involvement in the market.

As a consequence, brokers issued warnings of the building crisis within the professional liability insurance sector, stating that competition would undergo a collapse with a lack of insurers working within the market.  However, the affect of the dearth of insurers was quite different, with the declared premium pot falling by 10 per cent to £221 million.

According to insurance broker Lockton’s professions and risk solutions practice executive director, Steve Holland, this turnabout was due to underwriters cleverly adopting tactics that paved the way for insurers to reduce the exposure of their clients to the Assigned Risks Pool and also declare lower premium incomes.However, after complaints have surfaced that firms have been not fulfilling their financial obligations, this will be changing this year with the coming renewal season.

The Solicitors Reculation Authority, Mr Holland says, has been closing loopholes, forcing insures to declare the actual premium price in order to calculate the share of the ARP for which each insurer must be responsible.

This may hit the larger firms unfairly, so the SRA has instituted a £600,000 maximum cap on how much each insurance provider is required to declare, said Mr Holland.

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