Legal eagles will be trying to get the best deal for their solicitor’s indemnity insurance in the next 5 weeks. All policies fall due for renewal on the same date so it really is “silly season” when every solicitors insurance in the UK has to be sorted out at the same time. This common renewal date isn’t going to change anytime soon so I’m going to try and explain why it’s important to you, the causes and how solicitors could avoid unaffordable increases.
Your solicitor, your bills
Most solicitors are going to have to pay increased premiums for their cover this year. Some, especially those involved in conveyancing, may not be able to find cover, not that there’s much conveyancing going on at the moment. This will lead to either an increase in their costs or, if they can’t find cover and have to close, a reduced choice for people like you and me when looking for solicitors.
Too small a pond
I have a theory about why this happens and you might have to bear with me as this might seem like a tutorial. The principle of insurance can be summed us with the following tale. Five ship owners decided to pay 20% each into a pot in case one of their ships was sunk for whatever reason. The theory was that only one ship would go down at a time and each could afford to find 20% of the cost yet none of the could find 100%.
When people decide to buy insurance they’re contributing to a pool yet we’ll call it a pot. Nowadays, the pots are well defined and we are in pots of similar individuals so, for example, all solicitors contribute to the same pot and those that suffer claims are paid out of it. The problem is when more is taken out than is put in and someone realises that the pot can only meet the needs of the members if more is put in. This equates to premium increases.
I think this happens because there are very few pots for solicitors to go into, a handful of underwriters control the solicitors insurance market and have all the information about claims. Now we’ve got onto that, the claims insurers are “inundated with” may never be paid. Either the solicitor hasn’t stuck by the terms and conditions of their policy or the claimant hasn’t got a case. Only claims following professional errors will be paid and I expect these are rare. A healthy proportion of premiums will be used for defending claims that are never paid, some claims will be vindictive, others will fail for a whole raft of reasons.
Brokers who have not sent their clients round the solicitors indemnity insurance market over the last few years should be able to secure rates similar to last year.
One leading insurer for solicitors has said that they will not offer a quotation for any solicitor that is offered to them by more than one broker. Some solicitors may get excluded just because competing brokers are attempting to secure the best terms.
There is a new underwriter this year yet they have decided to only work with large brokers with a national presence — I call it cherry picking and that benefits no-one but the insurance company and the national brokers. What happens if this insurer decides to bolt after one year? A load of solicitors without insurance?
My advice for solicitors is to discuss a strategy with their broker now. They will be keen to help secure the best terms. Don’t shop around unless the existing insurance company doesn’t offer any terms.
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