Cover: firms still unconvinced of need for staggered renewal
Nearly two-thirds of law firms saw their professional indemnity insurance (PII) premiums go up last year, Law Society research has found.
The survey of 240 law firms also found evidence of “a growing divide in the PII market”, with smaller firms and black and minority ethnic (BME) firms finding renewal tougher than the wider profession.
This disparity has led the Law Society to explore urgently the reasons behind the findings, with discussions already underway with a number of key stakeholders.
However, overall 79% of firms reported no difficulty in renewing, compared with 74% in 2008-2009. Some 62% said their premiums had increased, with the median cost of compulsory PII cover increasing by a third, from £12,500 in 2008-2009 to £16,666 in 2009-10.
The profession paid out £241 million for the compulsory layer of insurance in 2009, a 7% increase on the year before when it was £226 million.
The survey also found that only 5% of firms which sought it were not offered cover by their previous insurer, and 68% stayed with their existing insurer. Most firms (93%) received an offer from at least one qualifying insurer, with the average response time of insurers for applications received in August and September improving by one week and two weeks respectively since 2008-09.
For the remaining 21% of firms, the experience painted a starkly different picture, with many reporting there was insufficient time to consider quotes due to delays. Only sole practitioners and firms of two to four partners had applications refused.
The survey found BME firms were notified of a decision by insurers later than the wider profession (56 days compared to 44 for the wider profession). More BME firms (16%), than wider profession firms (6%), were not offered cover by their previous insurer.
Though 71% of firms stated that improvements could be made to the renewal process, there was no consensus around what they might be. Though the idea of staggered renewal dates was mentioned by 39% (compared to 8% in last year’s survey), this still indicates that the majority of solicitors do not see it as the big issue some have promoted.
Law Society chief executive Desmond Hudson said: “The Law Society is committed to working closely with the insurance markets, solicitors and the SRA to try to address the root causes of the problems faced by a substantial proportion of the profession when it comes to renewal. We are particularly concerned by indications of different treatment of BME-owned firms. This is an issue where we are taking urgent steps to clarify and resolve the matter.”
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