Law Society warns against Solicitors Regulation Authority’s (SRA) proposal for minimum insurer financial strength rating
Solicitors could end up being charged with higher premiums or even find themselves going out of business if the Solicitors Regulation Authority pushes ahead with plans to introduce a minimum financial strength rating for insurers, the Law Society warns.
The Law Society’s annual survey of solicitors experiences of the 2013 - 2014 renewal season also warns that delays in the outcome of the review into a minimum financial strength rating could make renewals difficult to plan.
The report said: “The Law Society does not believe that this will address the systemic risk of insurer failure and lack of stability in the market and has expressed concern that if the proposal is implemented, there is a real danger that an already fragile situation will be severely damaged with the consequences of higher PII premiums and potentially more casualties among small firms.”
The survey revealed that 86% of law firms covered by failed unrated insurer Balva insurance (PII) found the renewal process as being very or fairly difficult, according to a Law Society report.
The annual 2013-2014 PII survey said the exit of Balva and partial withdrawal of rated XL resulted in unprecedented movement in the latest renewal season. It also found that unrated insurers increased their share of the market to 22%.
Almost a quarter of the 595 law firms surveyed found the renewal process for 2013-14 difficult or very difficult - a 5% increase on last year.
Lack of transparency over commission disclosure
The Law Society also raised concerns over a lack of transparency by brokers around commission disclosure.
In two thirds of applications (63%) firms reported that the broker did not disclose their commission at all – a 10% increase in non-disclosure since last year’s PII research.