Solicitors' professional indemnity renewal rates are likely to rise on average by 10% in 2011 for firms with no new claims and no significant change in circumstances, according to insurance broker Lockton.
However, the broker added that much will depend on the size of the firm, its claims record and area of business it operates in.
Lockton Companies senior vice-president Steve Holland predicted a tough 2011 for the industry. He said that Assigned Risk Pool (ARP) costs are more than 20%, meaning that for every pound of premium paid, 20 pence goes into paying for firms in the ARP.
"Insurers are struggling to make a profit in this market. However, I think they will try to shelter firms from the full effect of these rising costs where they have a good loss record and no significant change in circumstances," Holland said in a statement. "Any firm that has seen claims, however, would be well advised to start talking to their broker early since the rising trend of claims may push rates higher as the renewal approaches and insurers have less capacity for more difficult risks."
Lockton said a number of factors are driving costs up in 2011. These include moves by the Solicitors Regulation Authority (SRA) to prevent insurers from under declaring their true market share; rising claims; more firms in the ARP; more ARP firms failing to pay premiums; and the SRA requiring insurers to honour claims irrespective of whether premiums have been paid.
Lockton also expects the problems with the ARP to continue, particularly as significant changes to the pool have been delayed until 2013. This, says the broker, is likely to deter high-quality insurance capital from entering the market.
Lockton pointed out that a number of insurers, including Hiscox and ACE, have already exited the market and others are looking to cut their market share. “There are some new insurer entrants into the market,” said Holland, “but questions remain over the quality of their security and their long-term commitment to the sector.”
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