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 (SRA).
It has also once again raised the prospect of insurers being able to void policies for misrepresentation on the proposal form or non-payment of premiums.
The SRA issued a consultation this week on implementing the reforms to the indemnity scheme that were announced in April – including closing the assigned risks pool and ending common renewal in 2013 – but also a series of additional changes.
It said a number of solicitors and the Law Society have raised the issue of insurers only leaving quotations open for very short periods. “It has been suggested that this practice hampers the proper operation of the market and that a minimum period should be specified in the [qualifying insurers agreement].”
Ireland will shortly require quotations to stay open for five days and the SRA is seeking views on whether it should adopt a similar approach.
While in 2010 the SRA announced that it would not require qualifying insurers to possess an independent credit rating, the consultation paper said “we have taken the view that the provision of better information by insurers to firms would be likely to reduce risk [of an insurer becoming insolvent] without damaging competition”.
It is proposing to require insurers to confirm their credit and/or insurer financial strength rating, or to state that they have none, and the identity of the agency that has provided the rating.
In April the SRA decided not to change the current position that insurers not able to cancel policies for non-payment of premium or for misrepresentation in proposal forms. However, the consultation said “it is our intention to reconsider this matter further in due course and views are sought on the issue at this stage”.
Next year the cost of the assigned risks pool will be shared by insurers and solicitors. The SRA plans to fund solicitors’ portion by using any excess money still held in the Solicitors Indemnity Fund, supplemented as necessary by a levy. Further information on the details of these arrangements will be announced in 2012, the consultation said.
Richard Collins, the SRA’s director of standards, said: “As a public interest regulator, our objective is to ensure a comprehensive set of arrangements to ensure that clients are protected through compulsory professional indemnity insurance and the compensation fund
“The changes proposed for implementation in October 2012 are particularly designed to ensure that the open-market system is sustainable and competitive for the foreseeable future.”