Solicitor PI rates on the up in 2011—Lockton

The increase in rates will also depend on the size of the firm and the area of business in which it operates. “2011 is set to be a tough year,” commented Steve Holland, Senior Vice-President, Professions at Lockton. “The costs of the Assigned Risk Pool (ARP) are more than 20%. That means for every pound of premium paid, 20 pence goes straight into paying for firms in the ARP. Insurers are struggling to make a profit in this market, however, I think they will try to shelter firms from the full effect of these rising costs where they have a good loss record and no significant change in circumstances.” “Any firm that has seen claims, however, would be well advised to start talking to their broker early since the rising trend of claims may push rates higher as the renewal approaches and insurers have less capacity for more difficult risks,” he added.hideThe ARP is funded by insurers that participate in the sector and provides cover for solicitor firms that cannot obtain cover from qualifying insurers or cannot reasonably afford the terms available to them because they are deemed to be too risky. One criticism levelled against the ARP is that it does not provide incentives for solicitors to deal with the small number of poorly run firms themselves by transferring costs of the pool more explicitly to the profession. As such, some argue, the costs are overly burdensome on insurers that pay into the scheme. Last year insurers restructured cover to help reduce their exposure to the ARP, which resulted in an unpredicted overall fall in declared premium of 10% to £221m. A number of factors are driving costs up in 2011. These including a move by the Solicitors Regulation Authority (SRA) to prevent insurers from under declaring their true market share, rising claims, more solicitor firms in the ARP, more ARP firms failing to pay premiums and the SRA requiring insurers to honour claims irrespective of whether premiums have been paid. “The whole cost of the ARP may not be completely passed on to the profession as insurers are likely to ‘swallow’ some of this cost because of competitive pressures,” commented Mr Holland. Over the past year claims have increased, said Lockton. There is also evidence that the continuing economic problems are fuelling claims for commercial company work. “Due to the worsening claims picture, any firm undertaking property or corporate work should be prepared to see rates in these areas of work increase,” explained Mr Holland. Lockton also said that the problems arising from the much criticised ARP are set to continue, as the SRA has carried out a U-turn on its proposed structural changes to the ARP and any significant changes are being delayed until 2013. “This delay is likely to deter quality capital from coming into the market until after the ARP is abolished—to avoid contagion of costs associated with the ARP’s legacy issues. A number of insurers have already exited the market, including ACE and Hiscox, and a number of other insurers are looking to reduce their market share,” said the broker. “There are some new insurer entrants into the market,” commented Mr Holland, “but questions remain over the quality of their security and their long-term commitment to the sector.” “I urge firms to prepare for their renewal, and where possible start negotiations with insurers early,” he concluded.

Solicitor PI rates on the up in 2011—Lockton

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