With just a month to go before solicitors have to renew their professional indemnity insurance (PII), the Law Society has today launched its much-anticipated offering for firms of one to four partners that cuts out brokers.
Chancery Pii is a joint venture between the society and Miller Insurance Services that provides direct access to three insurers with at least A- (Standard & Poor’s) or equivalent financial security rating but does not provide a broker service or any advisory services.
Chancery Pii will place insurance with the panel – made up of Allianz Global Corporate & Specialty, Aspen Lloyd’s syndicate and Pembroke Lloyd’s syndicate – and each will take a share of the liability and premium for a policy in an agreed percentage.
It will not accept enquiries from brokers, pay broker commissions or charge management fees. “The absence of broker commission and management fees will create a viable level of profitability for insurers, so encouraging a long-term presence in the market for this segment,” the Law Society said in a statement.
At the same time, Chancery Pii will receive commission itself and the society said solicitors should seek disclosure of how much this will be.
The society has also pledged to set an unspecified proportion of any profits it derives from the venture against the renewal premium of claims-free firms renewing primary cover with Chancery PII “and/or to provide additional membership support in future”.
Chief executive Des Hudson said the society has long been concerned about the instability of the solicitors’ PII market, particularly the one to four partner segment, and the involvement of unrated insurers. It was right for us to explore options with the insurance market to increase the availability of choice for our members, particularly smaller firms.” The market was rocked recently by XL Insurance’s decision to pull out of covering such practices.
He criticised brokers for failing to co-operate on initiatives such as developing a voluntary code of conduct or standard letter of retainer or service standards, and for the level of commission paid to some brokers.
He said: “The scale of the commission payments does not always appear to represent value for money for solicitors. The prevalence of tied arrangements within the one-to-four partner segment means that many of our members receive an execution-only service and not advice. The advice given by some brokers is of variable quality, with some brokers using a disclaimer to avoid liability when placing solicitor firms with unrated insurers.”
Some insurers have suggested that the Law Society risked becoming a version of the soon-to-be-abolished assigned risks pool, with only those firms unable to find cover from a rated insurer choosing to use it. However, the society says Chancery Pii only provides quotations to firms that meet the underwriting criteria agreed by the panel insurers.
There were also questions about timing – given that renewal is now close – and whether having its own insurance scheme would make the society able to provide solicitors with independent advice on insurance, and also less effective when lobbying the Solicitors Regulation Authority over indemnity issues. The society says Chancery Pii should be one of the options solicitors consider when conducting a full review of the market.
Chancery Pii is a managing general agency. As such, it owes its duties to the insurers, whereas brokers owe their duties to their clients.