PI cover for solicitors may become 'unsustainable', IUA warns

The International Underwriting Association (IUA) has warned that professional indemnity insurance cover for solicitors could become "unsustainable" if underwriters are not allowed to cancel policies where the premium is not paid.

The association has called for a right to cancel cover if premiums are not met, particularly for run-off cover, and the payment of excesses on a policy to be mandatory. It believes that without such measures it is likely that insurers will become more selective in the risks they accept, and smaller conveyancing firms that generate lower premiums could face a restricted choice and higher costs for professional indemnity cover.

IUA has set out its concerns in an open letter to the legal industry, having discussed the minimum terms and conditions of such policies with the Solicitors Regulation Authority.

IUA stated that the current rules are contrary to established contract and insurance law principles. "Neither are they required by the Financial Conduct Authority or any other regulators with an enhanced consumer protection focus," it said.

It added that efforts to mitigate the issue in the short term by reviewing its supervision and enforcement processes "will not fundamentally address the core concerns of insurers and are unlikely to have an impact on the forthcoming renewals season in October and beyond".

Chris Jones, director of legal and market services, at the IUA, said: “Many solicitor firms are facing economic pressures and we have already seen an increase in requests for payment of premiums by instalments. Insurers have shown their willingness to work with other professions that are struggling to mitigate the short-term economic effects of COVID-19, but the complete lack of any protection around payment of premium and excesses makes it far more difficult to do this for solicitors."

“It is not proposed that there should be any change in the scope of insurance offered. Our objective is to better manage policies to ensure that solicitors pay for the cover that is being provided to them. This will benefit the market by providing long term confidence in the availability of cover and giving insurers more flexibility to develop bespoke arrangements for their clients.”