Indemnity insurance

Our latest news round-up reports on a barrister jailed after stealing £72,500 from his chambers, more problems with the SRA’s online PC renewal system, surveys on fixed fees and compliance, and the appeal court upholding a ruling against a firm innocently caught up in mortgage fraud.

The Law Society and Solicitors Regulation Authority have been granted leave to intervene in a High Court case on whether professional indemnity insurers should be able to effectively cap cover by aggregating claims against a firm – with a bill of £50m at stake.

Solicitors and insurers should share equally any exposure to the assigned risks pool in the 2012-13 indemnity year to ensure insurers have “skin in the game”, the Law Society is to urge. However, the profession’s liability could still reach £30m.

Solicitors paid £256m for the compulsory layer of professional indemnity insurance – the highest amount since the first year of buying insurance on the open market – Solicitors Regulation Authority figures have shown.

Professional indemnity insurers will have to leave quotations open for at least five days and provide information about their credit ratings under plans being considered by the Solicitors Regulation Authority. Voiding policies is also back on the agenda.

Just 53 law firms have failed to find professional indemnity insurance and so entered the assigned risks pool (ARP), provisional figures have shown. At the same stage last year, 409 firms had entered the ARP. Firms still have a month in which they can find secure insurance and backdate it to 1 October.

Almost a quarter of law firms in the assigned risks pool had already decided to close a week before the renewal deadline, while the Solicitors Regulation Authority has flagged up the “serious risk” of other firms practising without insurance.

The Solicitors Regulation Authority has welcomed the suspension of a solicitor who failed to pay his assigned risks pool premium as it vowed to step up enforcement efforts against other such firms with the end of the indemnity year looming.

Smaller law firms are set to have more choice for the professional indemnity insurance this year after Legal & Professional Insurance entered into an agreement with broker Marsh to target practices with two and three partners.

The largest provider of professional indemnity insurance to solicitors has announced that it will not be seeking any new business this year because of the Solicitors Regulation Authority’s failure to abolish the assigned risks pool immediately.

A new professional indemnity insurer has entered the market, targeting conveyancing firms of up to 10 partners. In a move that will be welcomed by a sector of the profession that generally has minimal choice of insurer, First Title Insurance has joined forces with INK Underwriting Agencies Ltd.

Size, claims record and changes to the number of fee-earners are the factors that influence law firms’ professional indemnity insurance premiums, not practice area or ethnicity, Law Society research has found. A review of the 2010 renewal season found that smaller firms found their premiums going up the most, as did those with a claims history in the previous 12 months.

The Solicitors Regulation Authority is to crack down on indemnity insurers that restructure law firms’ cover so as to reduce their exposure to the assigned risks pool. The move comes despite the fact that an investigation of the practice is ongoing and has yet to reach a conclusion on whether the previous rules were breached.

Indemnity insurance premiums for law firms with no new claims and no significant change in circumstances are still set to rise 10% this year, a leading broker has warned. Predicting a “tough” 2011, Lockton also called for a “fundamental review of the whole conveyancing process”.

Some 138 law firms have closed after entering the assigned risks pool in the past two years, while solicitors who do not pay their ARP premiums are being pursued into bankruptcy, the Solicitors Regulation Authority has reported. Most of the firms (119) shut through an orderly wind-down, while 19 were closed by an SRA intervention.