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Law Society pushes for cut in risks pool premiums as indemnity deadline looms

29 September 2009

The Law Society has asked the SRA to consider cutting the premiums payable by law firms which enter the Assigned Risks Pool (ARP) having failed to secure indemnity insurance by the deadline of the close of business tomorrow.

Small fiirms which end up in the ARP have to pay an insurance premium set at 27.5 per cent of their turnover. It is feared that many more small firms and sole practices will fail to find insurance, under the combined pressure of dramatic rises in premiums and a property market which is only gradually recovering.

John Scott, vice chairman of the Sole Practitioners Group, said that conveyancing and an increase in claims for mortgage fraud were at the centre of concerns.

He said that all the sole practices he knew in the Newcastle area had been able to secure insurance, but, in many cases, only by accepting premium increases of at least 60 per cent.

“One firm has had to obtain insurance at twice the cost, and will review the situation in the New Year to see if it is worth going on,” Scott said.

However, he said he preferred the situation where firms insured themselves on the open market rather than through a mutual fund like the Solicitors Indemnity Fund.

Janis Purdy, sole practitioner in Bristol and spokeswoman for the Sole Practitioners Group, said she had no idea how many firms would be in the ARP.

“There will be a certain number of firms who nobody will touch,” she said. “We get an awful lot of phone calls from firms, and there is usually a story behind them as to why they cannot get insurance.

“Some insurers have hiked up premiums more than others. There have been quite astronomical increases for no apparent reason,” she said. “Other insurers will come forward with something cheaper, but no one will get cheaper insurance than last year.”

Purdy said most of the claims coming related to conveyancing. “The price of the recession has to be paid,” she said. “We have had several years of relatively cheap insurance. Now it is pay back time.”

Chris Stocker, principal of Stocker & Co in Oxfordshire, said his firm, which does mainly conveyancing, was protected by a two-year indemnity insurance deal under which he paid around £5,600.

As a comparison he obtained a quote from a rival insurance company this year, which came to £10,000. Stocker said some firms, with a similar turnover to his, were being quoted £20,000.

Des Hudson, chief executive of the Law Society, has written to all professional indemnity insurers and the Association of British Insurers, raising the society’s concerns about inflated premiums.

“It has become apparent that some firms are struggling to get affordable cover or any cover at all in certain cases,” he said.

“We are seeing instances of unjustified inflated quotes compared to last year, as well as what appear to be questionable practices in imposing unreasonably short deadlines to accept an offer, for example, some insurers are giving solicitors just 24 hours to accept their quote.”

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