The annual scramble to renew professional indemnity insurance is underway, with firms racing to meet the 1 October deadline.
Firms which fail to renew cover on the open market by that date will be automatically transferred to the Assigned Risk Pool (ARP), an expensive emergency measure that covers firms for six months only – previously, firms were able to remain in the ARP for up to 24 months. If firms have no insurance then they must cease trading.
However, Frank Maher, partner at Legal Risk, who advises law firms on compliance and risk management, said: “The market is fairly benign.
“The big firms are seeing a reduction in their rate and in their premium. Everybody’s fears of cataclysmic claims coming out of the recession have not materialised.
“There are a lot of conveyancing and mortgage claims against high-street firms but that has not been reflected by claims against the big firms. Inevitably, a few firms will close down. History relates that it is usually about 1 September that firms find out they have a wayward fee earner.
“We have had a few firms looking to close down or sell up, but it’s not a nightmare. There are more insurers out there, particularly for smaller firms, for example, Axis and Elite have joined the market, so there is enough competition to keep the prices down.”
Maher said renewing indemnity has become “more complicated” for smaller firms in recent years.
“It used to be that you could appoint a broker you trusted and he would shop around, but now brokers generally do a deal with a particular insurer where they have exclusive rights to sell the insurance; therefore, if smaller firms want to shop around, they have to go to lots of brokers.”
The ARP is due to be scrapped in October 2013.
