The new solicitors indemnity market is in danger of falling into chaos with different insurers offering vastly differing premiums for the exactly the same risk.
One north-east broker says that one client, a sole practitioner, could have chosen a premium of either £2,000 or £10,000. Another broker, Alan Eyre director of Manchester broker Alec Finch says a firm of four solicitors was offered quotes ranging from £11,000 up to £50,000. "The insurance industry seems to want to shoot itself well and truly in the foot," he said.
Much of the chaos is blamed on the newness of the market, which was created when the law society voted to scrap the Solicitors Indemnity fund, the mutual that had enjoyed a monopoly on the first £1m PI cover for every firm in England and Wales.
Solicitors now have until September 1 to buy their PI cover in the open market. Some sole practitioners will be buying cover for the first time.
Dozens of insurers and wholesale brokers are now frantically pitching different parts of the market after a very slow start. "I think maybe only 10% of the 10,000 solicitor firms will have bought cover by now," said Eyre.
Aon, March, HSBC and Nelson Hurst, part of Alexander Forbes are targeting small practitioners.
While Zurich and St Paul are the front runners in the race competing for business across the board, but particularly eyeing the medium to large solicitor firms.
Trevor Moss, Director, Nelson Hurst Professional Indemnity said: "It strikes me that some of these discounts are driven more by a desire to sign up as many firms as possible, rather than by considering the best arrangement for each individual practice."
St Paul, which won the contract to replace the SIF fund with the official Law society scheme, has cancelled leave throughout August.
One London-based sole practitioner solicitor said Alexander Forbes and Aon had quoted rates half as much as she paid via SIF.
Another personal injury sole practitioner said she has been quoted twice as much by St Paul than her previous SIF premium.
Generally, solicitors that practice personal injury and conveyancing are considered high risk.
Robert Torrance, chief operating officer of Zurich Specialities London, doubted insurers are sacrificing underwriting profit for market share but admitted that fingers were likely to be burned.
"This is business that is quite difficult to underwrite. We are certainly not in the game to low ball our prices and gain market share in year one. I think we are all applying very different rating criteria and weightings. It would be surprising if every insurers gets it right."
Kerry Falcon of London brokers AK Falcon said he expects to see heavy losses in three years time when the dust settles.
"The SIF fund was worth about £250m in premiums but was generally thought to be undersold by about £100m," he said. "This market could be driven as low down as £100m."
