The Solicitors Regulation Authority recently revealed that professional indemnity insurance payments made by solicitors on their compulsory business liability insurance cover have risen by 20 per cent in 2011.
For the 2011-2012 year, the cost of the compulsory portion of professional liability insurance for the nearly 11,000 solicitor firms in England and Wales rose to £265 million, which was 20 per cent higher than the £214 million figure that accompanied the previous year.
The increase in professional indemnity insurance, which makes sure that claims made by clients on the basis of dishonesty or negligence can be met, came on the heels of not only the number of solicitor firms entering the Assigned Risks Pool falling but also on premium prices rising. The ARP, which provides the last stop for firms who encounter difficulties in securing cover on the open market, permitted only 32 firms to obtain cover under it this year, a marked difference from the 2010-2011 financial year’s figure of 309 firms.
The rapid decline came after the SRA made ARP qualification rules much more stringent this last April in a bid to better control the profession’s costs as a whole. More limitations were made later in the year, with the maximum time a firm can remain in the ARP reduced to six months, down from a full year.
Antony Townsend, chief executive for the SRA, said that the Authority found that one of the most challenging things it needed to overcome was the high number of firms that avail themselves of the ARP, as the massive number of firms was placing an unfair burden on others in addition to acting as an inhibitor to keeping the professional indemnity insurance market competitive.