The perils of unrated insurance: our story
The following example highlights the importance of giving very careful consideration to whether or not your business should be insured by an unrated insurer.
A solicitors practice found itself in the unfortunate position of struggling to obtain PII after a series of claims made against them. These were a consequence of the errors made by a sole employee in their conveyancing department. Unfortunately, by the time the firm had discovered the solicitor’s negligence, the damage had already been done. The solicitor in question was asked to resign, but went on to set up his own practice. He continues to thrive, unaffected by the devastating impact that his claims history has had on the original firm.
After these claims, the firm’s rated insurer decided not to continue to offer cover for the following year. When the rated insurer withdrew, their existing broker could not provide them with any alternative options. Forced to appoint a new broker, they were immediately recommended cover with the unrated insurer, Balva. The partners of the practice knew nothing about Balva so sensibly checked that they were on the SRA list of insurers and assumed that being listed ‘was a seal of approval’. The broker did not point out the risks of choosing an unrated insurer; instead they reassured the firm that it was not a cause for concern and confirmed that insurance was in place. (This later turned out to be untrue).
Balva was meant to be processing one of the firm’s claim notifications when it announced its administration and later its insolvency. This meant that the solicitors firm had no choice but to become self-represented. As inexperienced PII claims handlers, they ended up having to settle the claim at the expense of the individual partners.
Time has now elapsed but two decisions by the practice still haunt them: appointment of a seemingly inexperienced broker and placement with an unrated insurer.
Happily, with the assistance of a professional market broker, improved risk management, an improved claims history and the passage of time, the firm is now indemnified by an A-rated insurer.
A partner of the firm said: “Our practice is our livelihood. In a perfect world we would wish for it to be adequately covered should we need to call on the policy. However, despite our previous experience … if we were faced with closing down or choosing an unrated insurer then, yes, we would have no option but to choose the unrated insurer. The difference now is that, after the experience we have had with Balva, it would be an informed choice and we are much more aware of the risks.”