Risky Insurers?

Feather the nest to protect the vulnerable?

The Law Society has decided to warn solicitors that they need to check the financial strength of their insurers. Just because they are on the list of qualifying insurers, it doesn't mean that they have passed any financial stability tests.
They have produced a whole new guide to insurer insolvency which you can find here.

Just as with motor insurance, I anticipate that most solicitors regard insurance as an obligation that must be paid for. The idea of actually claiming on it is usually far from our minds. Indeed that's exactly what the insurers want as they exhort us to put in place risk reducing measures and raise the premiums of those with the temerity to claim.

One thing the Law Society press release is silent on is the benefit of inserting limitations of liability into terms of trade. Instead they publish further guidance on top-up and excess layer cover. I begin to wonder if they get commission from these spiralling insurance sales.

Surely the credibility of the *ratings* industry no longer exists in the realms of ordinary men after all those highly rated junk mortgage securities (Remember Northern Rock anyone?). Even so the SRA require that Insurers must now disclose whether or not they have a financial security rating and the provider of this rating. Here is their handy list. Only one firm, Travelers is prepared to deal direct and they even quote their minimum premium, £1,575 though that was last year.

For all the dire warnings, read the full press release.

Rethinking insurance

I am pleased to hear that the Law Society is considering staggering the renewal dates for Professional Indemnity insurance and a return to the Solicitors Indeminty Fund (SIF) (although whether the latter is the best option is not something on which I am qualified to comment).

Clearly something drastic was needed following the insurance fiasco firms faced this summer. This resulted in a six fold rise in the number of firms that went into the Assigned Risks Pool – a place normally reserved for firms with poor claims records, or some other serious problem. As the insurers were taking their time in issuing quotes it was scary. Many of us were left imagining how awful it would be to end up in the ARP on the one hand, and then thinking surely that's impossible given that I have a completely unblemished claim free record. What I hated the most about the experience was that one was completely powerless to do anything about it. Only 3 insurers would look at IP work, so this so called competitive market place where one could shop around was simply non existent. What made matters worse was that some brokers were implying that IP was a No Go area - far too risky to entertain.

Interestingly, some of us had a meeting with Redvers Cunningham of the Bar Mutual Insurance Fund Ltd. He is also a director of PAMIA. Amazingly he told us that IP is in fact one of the lowest risk areas of work – particularly where that work is done by practitioners who specialise in the area. So, I hope the Law Society’s PII group will speak to knowledgeable individuals like Redvers when reviewing PII.

The Professional Body

The arrival in my post of a ballot form to enable me to vote in charter amendments for the Law Society made me realise how concerned our professional bodies are becoming about their future role. This is a perfect opportunity for the membership to demonstrate what they need.
I am a solicitor though at present I don't practice as such but I'm still on the roll and still a member of the Law Society and still do my CPD so I get to vote.
The Law Society want to extend their membership to others in the legal field. They are thinking of offering post-nominals, i.e. initials designating qualification for use after your name that chartered engineers, patent attorneys and even trademark agents that are members of the Institute have enjoyed for years.
My other professional body, the IET has already undertaken reforms which widened its membership. There was quite a lot of resistance to that but it has made the organisation more vibrant and active and those aren't adjectives you typically associate with the Law Society at present.
How do we see the Law Society in future - what does the SOLO practitioner want from Chancery Lane - an expensive restaurant or something more practical that we can use to help develop our businesses. Speak up, they are listening because they have to.