It has been reported recently that Elite Insurance (who provide insurance for just over 1,000 firms) may not obtain a rating in time for this year’s renewal period. Jason Smart, CEO, said “costs will rise if unrated insurers are banned.”
The consultation on whether to only allow rated insurers to take part in the market has taken place, and the decision will be announced publicly on the 24th May.
The paper suggests that Alpha and Elite are getting a rating, that isn’t a given and very probably not before October in any event. My sources tell me that Enterprise is unlikely to apply for a rating and they may not continue beyond renewal anyway.
Alpha/Elite currently insure over 2,000 firms between them, and it is unlikely their capacity will be replaced, except at additional cost to the Profession. However, the information I have been given is that the SRA will back down on forcing unrated Insurers out. We will have to wait and see!
Tips
Start Renewal Process early, the only hindrance may be that Insurers are not ready to quote until July, but it has to be worth trying.
Check your route to market, each law firm should ask how their proposal form reaches the insurers, i.e. how many broker’s hands does it pass through to get to the Underwriter. Not only is this expensive, but your chances of being let down are greatly enhanced.
I was quoted one example last year of a firm with fees of £2,500,000 who passed their form to their friendly local broker, who in turn passed it to his friends at another broker, who passed it to yet another broker, and another. That is four brokers taking money out, but more seriously how does a firm get its message through, and in the event of bad news [from the insurer] how does “We are not renewing your cover” get through in enough time for anyone to do anything about it.
In addition to the above I have had some helpful comments and challenging questions from Bold Group members:
Insurance was my passion for in excess of 25 years- owning and running my own brokerage which underwrote vast amounts of scheme business. There is just simply no two ways about it — profitable business should be awarded accordingly, and the problem and grey areas penalised. This roughshod approach is neither fair nor indicative to creating a steadier market for Legal P.I.I.
The common renewal date had not aided underwriters at all, and historically has denied insurers the time to look at and rate risks accordingly.
My own firm (1-4 partners) has worked exceedingly hard over the past 4 years to implement stringent procedures and controls, and it is my opinion that a company should not be viewed on the number of partners. Irrespective of the fact that a company may have 4 or 10 partners — does not necessarily mean that the larger concern is any better or more competent in the areas of law they involve themselves in. Claims experience over a number of years is the guide to a well-run company — and underwriters obviously have the right to pick and choose who they indemnify, who they apply loadings to, excess levels, etc.
Having taken a £35k hike in our premium last year, with a claims experience which is nothing short of excellent, I had hoped for some rationale to return to the market this year. The outcome of the SRA’s decision whether to allow or ban unrated insurers could cause one hell of a stir, as reduced capacity can only lead to one thing, increased rates for those who actually obtain cover.
The only advice I can give is to start the process as early as you can with your broker/insurer — I have already put a call into mine!”
2.“Might I suggest that our small firm members might apply for a quotation with Chancery PII who were set up, with Law Society support, last September with the aim of assisting small firms who would otherwise have been unable to obtain insurance. The underwriters are Alianz, which is AA- and Lloyds who are A+. Our first year premium was very reasonable compared to other quotes obtained and we have just been offered (and accepted) a 6 month extension to our policy for a further premium pro rata the 1st years premium.”
3.” A few questions, to which I would appreciate your and other member’s opinions:
A. Why does the SRA have to wait until nearly the end of May to make its decision on unrated insurers, when they must know this is critical to so many firms?
B. Do we have any indication on what the decision will be?
C. Are Alpha/Elite doing anything in anticipation of the SRA’s decision, e.g. have they started the process to acquire a rating? Are they in communication with the SRA to try and protect their position?
Rob Hailstone
The Bold Group (www.boldgroup.co.uk)
