Insurers continue to lessen their exposure to solicitors' PI cover
The renewal season for solicitors' PI is always a frantic time of the year for solicitors, brokers and insurers alike. But this year seems to be more frenetic than ever with many insurers making a bolt for the exit door leaving firms, and particularly smaller practices, in a vulnerable position.
With claims this week that Ace more than doubled its minimum PI premium for solicitors from £20,000 to £50,000 in one working day it’s clear there is an acute problem facing the legal profession in the coming weeks.
There is also a suspicion that some insurers and brokers are sitting on terms which could lead to a frantic rush to find alternative quotes before the October 1 deadline.
Figures from the Law Society show that small firms make up the lion’s share of practices in the UK. In July 2007, of 10,114 private practice law firms, 95% had 10 or fewer partners, while 85.9% had four partners or less. The society believes these figures are unlikely to have changed greatly.
So Norwich Union’s decision last month to withdraw cover for new business where firms have less than ten partners and carry out conveyancing will certainly impact on a large segment of the market.
The reason behind these pricing decisions seems to be closely related to the credit crunch and a surge in mortgage fraud explained an NU spokesperson. With gloomy assessments that the UK housing market’s woes could extend beyond next year, it is possible things could get worse before they get better.
But while the next few weeks will undoubtedly be chaotic, the recent movement by insurers is a necessary, albeit painful correction for the market which has lived on borrowed time for too long, says Simon Lovat, divisional director at UK Professional Indemnity.
“Solicitors have always had it so good with last-minute deals, but I don’t think they’re going to be able to get that this year,” he said.
“The market has driven itself into a position of being so unprofitable now that everybody is just trying to walk away from it. It’s a market cycle but a self-imposed market cycle.”
With insurers withdrawing their exposure to this market on a constant basis, brokers are claiming price changes are occurring on a daily basis. With RSA, Liberty and Novae just some of the names announcing policy changes to solicitors PI in recent weeks, the question is who will be next?