The recent changes will take effect from 2023 and impose certain obligations on both licenced firms and PII providers. Designed after public consultation on the subject, the purpose of the new regulations, according to the CLC, is to “…make the renewal process smoother than it has been, allowing practices time to seek alternative cover if needed and be able to plan for the outcome better”.
But how exactly are these changes likely to impact your firm, and what steps can you take to ensure that any negative impacts to your firm are minimised?
Under (less) pressure
By requiring firms to submit at least one PII application two months before the deadline, and insurers to respond no later than one month prior to the deadline, the changes ensure that there will be less last-minute pressure on firms to get cover sorted. In an industry subject to enough pressures as it is, this can only be welcome news.
A little safety net
Firms unable to meet the deadline for securing cover will also benefit from the requirement for providers to furnish them with a 90-day extension, charged at a pro rata rate. Firms which then go on to find new cover will have that new cover backdated to the 1st July.
Dealing with the runoff
In spite of representations from the insurance industry during the consultation, the requirement to provide integrated 90-day runoff cover remains, and the CLC has made clear both that this should be priced into the premiums payable on a policy and that the industry made no representations which convinced it this would not be possible.
An excess of compromise
The new rules will also allow firms and insurers to negotiate their own excess thresholds on claims, subject to approval first being sought and granted by the CLC.
It’s not all untrammelled good news for firms, though. Yes, the CLC has committed to work with providers to make it easier for start-up firms and firms transitioning from SRA regulation to obtain cover. But let us consider the obvious knock-on effects which may arise from these changes.
The requirement to provide integrated runoff cover and the new pressure on insurers to respond to firms one month before the deadline are unlikely to lead to lower premiums. With PII costs already rising rapidly, this could apply even more pressure to smaller firms.
A dwindling market
It’s likely that, given the new requirements imposed by these changes, and the current trend within the PII market, that some providers may just decide to stop providing cover in this area. A smaller pool of insurers will lessen competition in the marketplace and may also contribute to spiralling costs.
One (pressure) door closes, another opens
More time before the deadline to get PII cover secured sounds great, but also means that there is now increased pressure on firms to have these matters concluded sooner. With at least one application needing to have been submitted by the 1st April, it’s likely that this may clash with the end of the tax year and various other market forces to make a very busy month indeed for firms.
Compass guides the way
Compass isn’t magic*, nor indeed is it an insurance provider or search engine. What it can do, however, is ensure that fewer claims are made against your PII, thus lowering the risk and lowering potential premiums, as well as making your firm a more attractive proposition to new PII providers if you’re looking for a change.
Compass also minimises the administrative cost to your firm of dealing with SDLT, and outsources the risk to a third party, ensuring that your firm can tick “worrying about future claims for missed SDLT reliefs” off its priority list.
*On second thoughts, maybe it is a little magic.
This article was submitted to be published by SDLT Compass as part of their advertising agreement with Today’s Conveyancer. The views expressed in this article are those of the submitter and not those of Today’s Conveyancer.