The International Underwriting Association (IUA) has warned the legal profession that professional indemnity insurance may become unsustainable if insurers are not allowed to cancel policies for the non-payment of premiums.
In an unprecedented open letter to the profession, the IUA has demanded changes to the minimum terms and conditions for solicitors’ professional indemnity insurance. As well as the right to cancel policies for non-payment, particularly for run-off, it wants the payment of excesses to be mandatory.
The IUA points out that as things stand, insurers have been faced with providing six years compulsory run-off cover in return for nil premium.
The insurers’ body is not proposing any change in the scope of cover, but it says without these measures insurers will become more selective in the firms they are willing to insure. It says that firms that generate lower premiums, such as small conveyancing practices, could again face limited choice and higher premiums.
The SRA has held talks with the IUA to try to resolve the issue, but a spokesman for the regulator said that last year the SRA board had decided “there would be no changes to the cancellation of run-off cover due to the non-payment of premiums.” In the meantime the SRA is attempting to mitigate the issue by reviewing its supervision and enforcement processes.
The Law Society is sympathetic to the dilemma faced by insurers. In its response to the IUA’s open letter it has said that it is vital for firms pay for their premiums and excesses. It argues that the SRA “should be more willing to take regulatory action against solicitors who do not make the requisite payments.”
James Burgoyne, Director – Claims & Technical, Brunel Professions says that the high levels of cover required by the minimum terms and conditions for solicitors’ professional indemnity insurance have long been a cause of concern to insurers. “The latest pressures brought about by COVID-19 have led many insurers to believe that the status quo is unsustainable,” he said.
“Insurers have been increasingly seeking financial information about firms in recent years, and substantially driven by concerns at inheriting 6 years of run off. The difficulties of 2020 have fuelled these concerns further,” James Burgoyne added. “The pandemic has heaped financial pressure on law firms – many of which faced premium increases for compulsory PII cover this year.”
The IUA has published the open letter on its website. The Law Society’s response is also available on its website. Reports about the issue have been published by Legal Futures and Law Society Gazette.
Brunel Professions is a leading provider of professional indemnity insurance broking to the legal profession. To find out more call Mark Sommariva on 0203 475 3275.