The International Underwriting Association of London (IUA), the trade body with the responsibility for underwriting professional indemnity insurance (PII) have written an open letter of the industry warning them about their PII renewals.
In the letter, the IUA warns that the current risk taken on by PII providers for non-payment of excesses and premiums is in danger of reaching unacceptable levels which could have far-reaching consequences for the industry. The trade body even approached the Solicitor’s Regulation Authority (SRA) with proposals to revise the minimum terms and conditions (MTCs) included when they underwrote policies.
One of these consequences could be restricting the availability and affordability of PII. This is due to underwriters being unable to cancel policies where solicitors fail to pay their premiums.
The open letter to the SRA on 2 September stated:
“The SRA is undertaking a number of measures to mitigate the non-payment issue in the short-term, for example reviewing their supervision and enforcement processes and effective communications with regulated firms.
“These steps are welcomed but will do little to address the core concerns of insurers and the likely effect of those concerns at forthcoming renewals.”
The IUA has made it clear that it continues to engage with the SRA, outlining insurer’s ever growing concerns involving the non payment of premium and policy excesses and the availability of continued and non-cancellable cover.
It fears that changes won’t be implemented before October and “the implications of this will be seen in due course.”
Chris Jones, IUA Legal and Market Services Director, said:
“Many solicitor firms are facing economic pressures.
“Insurers have shown their willingness to work with other professions that are struggling to mitigate the short-term economic effects of Covid-19, but the complete lack of any protection around payment of premium excesses makes it far more difficult to do this for solicitors.”
An SRA spokesman said:
“Everyone will be aware that we have recently undertaken a comprehensive, two-year period of consultation on insurance issues, including looking at a fundamental review of our minimum terms and conditions.
“Late last year, our board decided that in the light of feedback from the profession and consumers, the risk to client protection meant there would be no changes to the cancellation of run-off cover due to the non-payment of premiums.
“It will be some time before the implications of the Covid-19 pandemic are fully understood but we, like everyone else, are monitoring it closely.
“We have been talking with the insurers and are working with them to mitigate the risk of non-payment of premiums while maintaining this important consumer protection. We will continue those discussions over the next few months.”
Simon Davis, President of the Law Society said:
“We have offered to work with the SRA and the IUA to reach a mutually acceptable solution, and have suggested that as an interim measure the SRA should be more willing to take regulatory action against solicitors who do not make the requisite payments.
“These are difficult times facing the legal profession and the economy as a whole, so it is vital that we maintain a competitive market for professional indemnity insurance.”
Edward Donne from Howden’s gave us his insight on the PII market, you can see his thoughts here.
