Adopting standard questions risks giving away sensitive data to rivals, insurers say
Insurers and brokers have rebelled against Law Society plans for lawyers to have a standard question set for their professional indemnity (PI) insurance proposal forms.
The Law Society has been prompted to take action by pressure from lawyers, who say they resent filling in so many different forms at the renewal period and that the industry should adopt a standard one.
At the moment, some brokers will send their solicitor clients a proposal form for each different insurer.
Other brokers will draw up their own solicitors’ PI proposal forms, either by condensing several insurers’ forms or by writing their own forms, which are then accepted by insurers.
To simplify matters for solicitors, The Law Society has drafted a single form and wants insurers to put forward suggestions for the questions in the final version.
The Law Society does not plan to introduce the form for this year’s renewal period, but could introduce it next year. However, many insurers are reluctant to offer suggestions for questions, complaining it will rob them of their commercial advantage.
Zurich legal professions manager Jenny Screech said: “It is unrealistic to expect that insurers should share this intelligence with their competitors in the market, which they would inevitably have to do to justify the inclusion of a new question in a common proposal form.”
An ABI spokesman said: “The suggestion for a common proposal form came from The Law Society. We have been in discussions with them on this idea but, in practice, it would be difficult to achieve, given the differences in underwriting criteria between insurers.”
Another issue is that insurers are preparing which questions to ask on proposal forms for alternative business structures, which will come into force this year.
Alternative business structures open ownership of law firms to organisations and companies outside the legal profession.
Insurers that have invested time and effort in understanding alternative business structures will benefit from their more accurate questions.
Screech said: “This is a commercial marketplace, and each insurer stands or falls on the quality of their underwriting, which to a large extent is based on asking the
The Law Society head of regulation Elliott Vigar said he understood the market’s concerns about a single proposal form, but the model had existed in Ireland for some time and had not hindered the market.
He pointed out that, despite some insurer objections, there was still a lot of support for the plans.
To help insurers and brokers, The Law Society plans to host the standard question set on its website for easy access. It is also considering a scheme to check the accuracy of details provided by law firms as part of any standard form.
The Solicitors Regulation Authority (SRA), the Law Society’s sister body, has not yet revealed whether it will back the plans for a standard question set.
The dispute over a standard question set is the latest in a series of confrontations between insurers and the legal regulatory bodies.
In August, the SRA agreed to rewrite the qualifying insurers agreement, the rules that insurers have to agree to write solicitors’ PI.
Some insurers complained that rivals were bending the rules to pay less for claims coming from the assigned risks pool (ARP).
The ARP is a fund for solicitors who fail to get PI, and their claims are met by all insurers across the industry in proportion to their market share.
The ABI has spent last year battling to get the ARP closed as quickly as possible, but it met resistance from the SRA.
We say …
● A standard PI proposal form is already used in Ireland, but the market is much smaller. A single form might be attractive to lawyers in the short term but could backfire if, as a result, insurers choose to stop writing PI business for small partner law firms.
● Law firms that complain about the length of the current proposal forms forget the growing risk that they present to insurers because of rising conveyancing claims.
● Some law firms are keen to see mutual insurers return to the market, but this model struggles to remain competitive in a soft market when premiums are low, as the collapse of the Solicitors’ Indemnity Mutual Insurance Association last year demonstrated.