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ABI welcomes report highlighting 21 billion that the insurance market has saved solicitors

The ABI welcomes today's publication of an independent report on the need for changes to the solicitors' professional indemnity insurance market.  

The report, by Charles Rivers Associates and commissioned by the Solicitors Regulatory Authority (SRA), highlights that the move to an open market for solicitors professional indemnity insurance ten years ago has since saved solicitors £2.1 billion in premiums. This is based on the average cost of fees paid to the old Solicitors Indemnity Fund, against the average insurance premium paid in the open market. 

The ABI backs the recommendations in the report that, for a sustainable solicitors' professional indemnity market to continue, the following changes must be made:

·  The minimum terms of the policy, as required by the SRA, must allow insurers to set premiums that more accurately reflect the risks of work carried out.
·  The funding of the Assigned Risks Pool (for solicitors unable to get professional indemnity insurance) needs to change to provide more incentives for the profession to deal with the small number of poorly run firms by transferring the costs of the ARP more explicitly to the profession.
·   As with other types of insurance, insurers should be able to cancel a policy if a solicitor fails to pay its premiums. At present insurers cannot do this, so firms in difficulty find it easier to stay in business, so presenting more risk to their clients.
·   The single common renewal date should be scrapped.    
 
Kate Carr, the ABI's Assistant Director of Markets and Regulation, said:  

"This report clearly highlights the value of a competitive insurance market for solicitors' indemnity insurance. But it also highlights what we have long argued for - fundamental change to how this market operates to ensure a sustainable future for solicitors' indemnity insurance.  

"This market cannot tolerate periodic crisis, caused by a combination of poorly enforced regulation and restrictive policy requirements, such as insurers' requirement to stay on cover when premiums are not maintained, and exacerbated by significant increases in claims in recent years. Over 350 solicitor firms are now in the Assigned Risks Pool and this is simply unsustainable.  

"We hope this report will spur the legal profession into working with us to ensure that these overdue and urgent changes can be introduced to bring stability and sustainability back to this market."    

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Last updated 01/07/2016