Thursday 25 September 2008

Let's learn about professional indemnity insurance

It has been a difficult month for most IP Solo lawyers as the underwriters have taken their time to give quotes, and refused to insure some firms. I personally have been extremely worried and distracted by this issue, but thankfully now it’s all sorted for Azrights. However, I feel great empathy for anyone still trying to secure insurance so late in the day.

The whole experience has left a nasty after taste. The fact that ones business can be so arbitrarily at risk of ending up in the assigned risks pool, and having to pay 27.5% or more of turnover for insurance cover, is mind boggling. Some law firms have had to take a rapid decision to shut down, and provide their services as non regulated experts. It is shocking to have to take such action so suddenly, when you have not had time to survey your clients first in order to establish the likely impact on securing future work. On the other hand if you secure insurance for a vastly inflated premium your run off cover premium is going to be that much higher if you shut down next year.

What is unclear is whether the assigned risks pool is actually likely to happen to any firm with a clear record who still hasn’t found insurance cover by 1st October, and wants to stay in business as a law firm. The assigned risks pool is, after all, supposed to be for firms that are a poor risk due to their level of past claims or other extreme circumstances. Is it the case that for firms that do not fit the profile of an assigned risks pool firm, they are likely to find that one of the insurers will quote, albeit at a steep price (hopefully lower than 27.5% of turnover though).
It is difficult to get accurate information about what is going on and why. Is it a combination of market conditions, and the fact that the SRA has raised the bar for being a regulated law firm so high, that explains why some firms are now facing this terrible situation? Another noteworthy point is that some firms that have been dropped by AON have managed to get alternative quotes, often by reclassifying their work as ‘commercial’ rather than IP. It seems the market has hardened more for IP than for commercial work in general. There is a particular problem if you have ‘US domiciled’ clients, and anecdotal evidence is that if your turnover is less than £50,000 you are unlikely to secure insurance as an IP practice.

Jeremy suggested we run an event soon where we invite an insurance broker along to discuss this whole question of IP risk. I am willing to organise this, and would also want to invite PAMIA along (PAMIA insures trade mark and patent attorney firms for extremely low premiums). I would be curious to know who insures barristers and whether they have a broker we could also invite along.
However, it would first be useful to establish whether there is sufficient interest for such an event. Please let me know here, or indeed let me have any comments by email or on this blog.

No comments:

Post a Comment