Hudson accuses indemnity insurers of putting "gun to the head" of firms
In an outspoken attack on indemnity insurers, Des Hudson, chief executive of the Law Society, has accused them of putting a “gun to the head†of law firms.
In an outspoken attack on indemnity insurers, Des Hudson, chief executive of the Law Society, has accused them of putting a 'gun to the head' of law firms.
The attack came after reports of hundreds of firms, possibly as many as 500, failing to find indemnity insurance on the open market and entering the Assigned Risks Pool.
In a further development, Hudson said the society took the view that 'in principle' the single date for indemnity insurance renewal could be abolished.
He said insurers preferred to 'rail against the current system but on the other hand seek, in the view of some commentators, to manipulate it'.
He went on: 'Indeed allegations we have received from our members suggest that some qualifying insurers, who have (in the face of their previous endorsement of a 'go to market early policy') left proposals unanswered until the very last minute if at all, have given firms as little as hours to take or leave a quote and have then ramped up premiums dramatically from last year with no warning and little apparent justification. In combination this amounts to the proverbial 'gun to the head'.'
Hudson said the society, in anticipation of a hardening market, sought to negotiate a tripartite agreement with the Association of British Insurers (ABI) and the British Insurance Brokers Association earlier this year, but the approach was rejected by the insurers.
Nick Starling, director of general insurance and health at the ABI, said: 'We disagreed with the Law Society's proposed code of conduct because there are already freely available avenues of complaint and redress for customers if an insurer acts unreasonably.'
He went on: 'The unavailability of insurance for some parts of the profession is the result of a lack of effective regulation, the impact of the harsh economic climate on both insurers and solicitors, and the fact that the minimum terms of the solicitors' policy, imposed by the regulator, put all the risks of malpractice and negligence onto the insurer, with little or no downside for the solicitor.'
Starling said it was wrong for Hudson to suggest that insurers had manipulated the market.
'We have been rebuffed time and again in our attempts to achieve reforms that would make the market robust and sustainable over the long term,' he said. 'The only tool insurers have to deal with issues in the customer base is pricing '“ the minimum terms of the policy deny insurers the opportunity to act as they would in any other market, i.e. varying the terms of the policy to change behaviour.'
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.
Janis Purdy, sole practitioner in Bristol, said the price of the recession had to be paid.
'We have had several years of relatively cheap insurance,' she said. 'Now it's 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.