The proposed changes to PII indemnity rules need further consideration and debate to ensure a positive outcome to all
This blog post was also featured as a column in the September 2014 issue of Legal Practice Management magazine. To read the issue in full, download LPM magazine.
Following the decision of the LSB to postpone any decision on the SRA’s proposed changes to the PII indemnity rules, solicitors, brokers and insurers can now fully focus on the rapidly approaching renewal season. There has been much speculation surrounding the outcome of any changes, but there can be no doubt that further consideration and debate are necessary to ensure a positive outcome for all parties – parties who have differing opinions.
With an established marketplace and educated buyers, it’s worth considering why these opinions are different. The answer is transparency. In the minds of many solicitors, the insurance market is a black hole that sucks in thousands of practices and spits out prices with little explanation of how these prices are reached.
Brokers must take some responsibility here, as, in an industry that depends largely on actuarial data to generate its premiums, there clearly is rhyme and reason behind the pricing models of A-rated insurers.
It is interesting to note that when time is taken to explain to a legal practice all the factors that go into producing their premium, there is more acceptance and understanding – even when the price may not be palatable. For example, demonstrating the impact of additional conveyancing work on insurance premiums allows firms to consider their own pricing and business efficiency. It may not make commercial sense to expand this area of the practice if they are not charging sufficient fees in return.