There was an interesting article in Mortgage Strategy recently which caught my attention. The article predicted that around 50% of Lloyd’s customers could fall victim to negative equity if property prices decline by a further 10-15%. If this is correct then as is happening in Southern Ireland institutional lenders will inevitably be seeking recovery from somewhere or someone when they begin to suffer loss. In Southern Ireland it is known that Conveyancing now counts for 70% of all professional indemnity insurance claims.
What is happening in the background should be taken seriously particularly at a time when many solicitors are now looking to renew their professional indemnity cover.
There is no doubt that premiums will rise.
The problem practitioners’ face is that there is a complete and total lack of transparency within the professional indemnity insurance arena. Many of us are asked to complete quite detailed risk assessment documents. These are required by the insurers to that they can access the risk each firm presents and to then tailor a quote accordingly.
The problem is that when completing these forms there is little understanding on how an answer to a particularly question will affect the risk assessment and consequently the size of the premium to be paid. There is no guidance within the proposal form or risk assessment form that helps to understand how risk is assessed.
Knowing how membership of one particular accreditation scheme can affect the level of premium is important because it will encourage firms to invest time and money into obtaining ‘badges’ of this type.
Surely it is in the interests of the insurers to be transparent to make it clear what percentage reduction certain actions will result in so that all of us can then do all that we can to make sure those actions are taken in the knowledge that this will result in lower premiums in the future.
I question what the Law Society is doing to assist in brining pressure on insurers to make this information available. Our insurer broker mentioned that being a member of the Conveyancing Quality Scheme is of importance but could not say whether it would actually result in a significant reduction in future premiums.
The other issue I have with insurance is that there are so many brokers out there looking for your business but the majority of these are tied in with certain insurance companies. Surely this must present a conflict of interest and not always lead to the best deal.
It would be better use of Law Society resources if it took the time to review and investigate this market and to bring in measures to improve the situation for practitioners who are for the majority of the time working very much in the dark. Is this likely to happen? No.
Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at email@example.com