Almost a half of law firms using insurance brokers to secure their indemnity cover in last year’s renewal said brokers failed to reveal their commissions, a Law Society survey has revealed.
The survey of 498 firms found that commissions were not disclosed to 44% of firms who used brokers, and revealed to 41%. Most of the remaining firms, 11%, said they ‘didn’t know’ about commissions, while 4% paid fees instead.
In only 36% of cases was information about commissions ‘proactively given’, rather in response to specific enquiries.
In its PII buyer’s guide, the Law Society recommends that solicitors ask about commission to help them make an informed choice – brokers are required by the Financial Conduct Authority to answer if asked.
The annual indemnity survey, carried out by IFF Research for the society, was the first to ask firms about commissions in connection with the broker they actually used, rather than all the brokers they applied to.
The survey found that larger firms were more likely to report that their commission had been disclosed, with firms of two to four partners coming off particularly badly (44%) compared to sole practitioners (34%).
The Law Society said it would “review its advice and guidance for firms on use of brokers to see whether it needs to be strengthened, in view of the survey’s findings”.
The failure by brokers to disclose commissions is particularly significant given the increase in firms relying on a single broker – 57%, compared to 47% last year.
Aon was the most popular choice for quotes, contacted by 31% of firms, followed by Prime Professions/Willis (23%), JLT (13%) and Lockton (9%).
The vast majority of firms (91%) applied to at least one broker for a quote and 88% of those who found cover through a broker described themselves as ‘satisfied’ or ‘very satisfied’ by the results.
Elsewhere in the survey, just under two-thirds of firms (62%) described the 2014-15 renewal as not very or not at all difficult. However, 21% said they found it very or quite difficult.
Half of firms spent up to a month between starting work on preparing proposal forms and agreeing to take out a policy, with a quarter (26%) taking two months to do so.
There was a direct link between the number of insurance brokers used and the difficulty of the process. More than half (57%) of firms using four or more brokers found it difficult, 34% of firms using two to three brokers and only 11% of those using one broker.
The Law Society said it had started talks with the Solicitors Regulation Authority and the insurance industry to “explore how the burden of form-filling might be eased” and how its guidance might be improved.
Only 35% of firms said they found the Law Society’s online indemnity insurance advice useful and a mere 4% the helpline when preparing their proposal forms. Smaller firms were more likely to have found at least one of the services useful.
The survey said that indemnity insurance premiums remained broadly in line with the previous year, with only minor fluctuations, while the widely reported decline in the use of unrated insurers was confirmed with their market share falling by 6% to 17% of all policies sold.