Thousands of law firms could be just weeks away from being plunged into uncertainty. According to this year’s Law Society survey of almost 600 firms, 22% are relying on unrated professional indemnity insurers.That proportion is up from 16% in 2013 and more than double the 9% in 2012.
The survey results come weeks before the Solicitors Regulation Authority decides whether to ban unrated insurers from the market after the collapses of recent years.
The issue is most pressing for smaller firms. Overall, 23% of sole practitioners and 25% of 2-4 partner firms used unrated insurers, compared with just 2% of 5-10 partner firms and none of the largest.
The regulator is set to decide on policy at its board meeting in May following a consultation with the profession.
The survey suggests that firms are heeding warnings about making background checks on potential insurers. The proportion of firms rating financial stability as the biggest influence on their choice of insurer doubled from last year, to 20%.
But crucially, the majority of smaller firms still see cost as the biggest factor.
The exit of Balva and the decision by XL to reduce its market share from 20% to 2% restricted choice. In total, 76% of firms reapplied to their insurer for a quote, down from 91% in 2012/13.
Almost one in 20 firms entered the extended indemnity period.