Hudson: not satisfied with scale of commission payments to brokers
The Law Society has refused to comment on speculation that it is to launch its own professional indemnity insurance offering for law firms.
Legal Futures understands that it has been examining a managing general agency model, through which it would offer cover underwritten by one or more insurers. It would be run by a broker, and the Law Society is believed to have run a tender with five leading names in the market.
A managing general agency owes its duties to the insurers, whereas brokers owe their duties to their clients.
Insurance Times has reported that it will be targeted at firms of one to four partners as part of the society’s work to dissuade firms from choosing unrated insurers.
Last week Law Society chief executive Des Hudson e-mailed firms of that size about the rating issue and also said Chancery Lane was increasingly concerned at the level of commission paid to brokers operating in this market segment.
He wrote: “We are not satisfied that the scale of the commission payments represents value for money for solicitor firms purchasing PII cover through such arrangements. The society is therefore actively considering practical ways in which we can assist our members in this market segment with a view to increasing the available options for purchasing rated cover, and to do so on terms that represent good value for money.”
One senior figure who has seen the plans told Legal Futures that the society is looking at not charging commission in a bid to reduce premiums, although he questioned how this would work given that the broker running the scheme would still need to be incentivised.
A leading broker, who also preferred to remain anonymous, speculated that the offering must involve bringing new rated capacity into the market, as otherwise existing insurers would simply be competing with themselves.
Specialists contacted by this website suggested that any insurance scheme put together by 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.
There were also questions about timing – with renewal only three months away, some firms have already begun the process – 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 (SRA) over indemnity issues.
Last week the SRA announced that it would revisit the issue of whether to allow unrated insurers to write solicitors’ business.
