Kumar: We need to be fair to our regulated community and insurers alike
Firms of licensed conveyancers will have to apply for professional indemnity insurance (PII) two months ahead of the renewal deadline and in return will receive a response within four weeks, under plans put forward by their regulator.
The Council for Licensed Conveyancers’ (CLC) changes to its PII arrangements – which now go to the Legal Services Board for approval – will allow firms to make further applications less than two months before the 30 June cut-off, but the aim is to reduce the risks involved when firms and insurers take renewal right up to the wire.
It said the idea of requiring firms to submit one proposal by 1 May – and for the insurer to reply by 1 June – emerged from a consultation earlier this year and was “intended to make the renewal process smoother than it has been, allowing practices time to seek alternative cover if needed and be able to plan for the outcome better”.
The CLC’s full council has also agreed to introduce a requirement for an automatic 90-day extension of cover in the event that a practice is unable to renew cover, with the last insurer paid a pro rata premium based on the most recent annual premium.
Similar to arrangements for solicitors’ firms, the practice may not take on new work during the extended cover period. In the event cover is found during that period, the new insurer will backdate the policy to 1 July.
This will not apply to firms whose insurer has notified them and the CLC, no later than 31 March, that it will not offer renewal.
However, the CLC will continue to include run-off cover as part of the standard terms of insurance, despite the objections of insurers, which wanted it separated and not available if the firm did not pay the premium.
But the CLC said the risk to consumers of run-off cover not being in place was too great, with the experience of other regulators showing that many firms did not pay their run-off cover premium.
A policy paper before the council said: “Insurers seem to have regarded the CLC’s integrated policy as ‘free run-off cover’. Most have made clear that they have not priced the risk of run-off provision into the annual premium. There have been no representations that to do so would not be possible.”
Despite support in the consultation for allowing a firm and insurer to agree their own excess level, the council decided only to allow this when the CLC has approved it following a joint submission.
The paper said: “Removing all controls does not seem viable given the attempts by one insurer in 2021 to set extremely high excess levels to encourage certain behaviours by practices.
“The CLC can allow exceptions to the excess limits where the insurer and the practice can set out a clear and compelling rationale for that. Over time, this oversight could be relaxed if the CLC considers that the risk of high excesses has declined.”
Although the consultation was not about cyber cover, the CLC tested opinions and found significant support for mandatory cyber-cover but also concern about its cost and the wide variations in what was provided by different policies.
The council will return to whether there should be defined minimum terms and conditions for cyber-cover.
It also pledged to work with brokers and insurers to improve the availability of cover for start-up and firms transferring from SRA regulation.
CLC chief executive Sheila Kumar said: “Our primary responsibility is to protect the public interest, which is why we could not approve certain measures supported in the consultation.
“But we are very conscious of the need also to be fair to our regulated community and insurers alike. We believe that the package of reforms we have agreed achieve this difficult balance, as we continue to work on other important issues, such as cyber-insurance.”
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