It’s a curious word, incidental. Originating somewhere in the 17^th Century with roots in Latin, it has a surprisingly wide range of definitions. Indeed, even a cursory ‘surf’ of the internet will come up with the following subtle variations:

• Less important than the thing something is connected with or part of
• Happening as accompaniment to something else
• Occurring by chance in connection with something else
• Happening as a result (of an activity)

This is not mere rambling, however. The reason that the word has been placed in the spotlight is that regulatory change has once again reared its (unwelcome) head, with the FCA taking over the regulation of consumer credit activities from the Office of Fair Trading. As a result, from 31 October an SRA-authorised firm will only be able to carry out regulated consumer credit activities (think credit brokerage, debt advice or debt collecting etc.) if the firm is authorised by the FCA to carry out this business or, in the alternative, the activity is an exempt regulated activity under Part 20 of the FSMA.

Now, there are a number of conditions to be met in order for an activity to be exempt, but the crux of the matter appears to be that the consumer credit activities are provided in a manner which is incidental to the provision of legal services to a particular client. So, back to the question, what exactly is incidental?

Attempts to arrive at an answer will no doubt lead to a lot of head scratching for lawyers up and down the land, as they attempt to come terms with the new regime. Of course, they could always succumb to the SRA’s useful suggestion that, due to uncertainties, most prudent firms would register with FCA in any case…

Those ‘prudent’ among you will be placed into either ‘higher-risk’ or ‘lower-risk’ categories and have a detailed application process for FCA authorisation to look forward to, probing for information regarding your business, its structure and financial resources. Oh, and there is a fee to be paid if you do make the threshold (of course!)

This was a headline recently carried by a Law Society Gazette blog which highlighted an (unwelcome) shift in conveyancing fees and associated risk from a Professional Indemnity perspective.

There is no doubt about it, conveyancing and professional indemnity have an uneasy relationship. For every piece of legal advice there is an associated risk but conveyancing work is high value and, as a result, the premiums are high. Helping to explain why this is the case, market claims’ statistics gathered by Chancery PI “show that 43 per cent of claims notifications and 10 per cent of financial claims payments, at an average cost of £42,000, are generated by conveyancing.” A lot of claims then (especially when you ask what percentage of work conveyancing represents?) and as we all know the premiums of the many pay for the claims of the few (or not so few, as the case may be).

Now we all know that firms look for value in terms of their insurance premiums, and at one point or another various firms will have chosen an unrated insurer. “However, as a number of these smaller firms have learned in the past the purchase of insurance can itself present a risk. Any firm that has had to purchase mid-term following the failure of an insurer will know this to be true. The best possible outcome in this scenario is that a firm ends up paying twice, with the worst being that they have to close…” (See article by Mark Carver)

As a previous blog also highlighted, firms risk being excluded from mortgage panels if they fail to provide rated paper. Whilst there is undoubtedly a difference in price between rated and unrated capacity, from an insurance business perspective, the business downsides associated with using an unrated insurer have undoubtedly amplified.

This is not a virtuous circle. Higher premiums for rated insurers, ever decreasing fee levels, and property prices on the rise (39.12% in the decade to 2014, to be precise) mean that the question – is the reward worth the risk? – may not be wholly satirical after all!

The walkie talkie – a building that stands just outside my office window and which yesterday had the dubious honour of being voted the “ugliest and most hated building in Britain and branded a gratuitous glass gargoyle graffitied on the skyline.” You will therefore understand me when I say that I was not filled with optimism on behalf of one of my colleagues when they recently announced that they were going to get a coffee in the ‘walkie talkie’s ‘roof garden.’ How wrong I was!

Getting to the lift is an experience, apparently: photo ID required, then a metal detector and an x-ray for handbags. Pass all of this and the lift awaits, swiftly moving up 35 floors to the garden itself. Once there, however, the views are fantastic, there is a nice breeze and there are three eateries at reasonable (for London) prices. There are also many iconic buildings in London, most of which are visible from the garden (from an entirely new perspective) making for a fun game of spot the…

Unlike so many of the iconic buildings and developments in London, this ‘gargoyle’ is also surprisingly egalitarian. Open to all, and without an eye watering charge to enter (though remember to book) it is an experience to try – we have even taken clients there.

Just could not resist please do have a look at Cownomics

It is so true!!

So I am now more than a month into my time here at QLP, which means (to continue the sporting clichés that characterised my first blog) that I have lasted longer than an Australian innings. It has been an interesting and enjoyable time, dicing with the intricacies of rated insurers, third party funding and the much loved professional indemnity renewal season.

Overall, my impression of the professional indemnity market is that it is a competitive one – Brokers competing to secure solicitors the terms they need at an appropriate price creates a fast paced and challenging environment. However, it is also a complex and evolving one. In particular, recent times have seen a move by building societies and mortgage providers towards demanding a rated insurer in respect of professional indemnity cover. Indeed, it was recently reported that the Yorkshire Building Society Group took the decision to restrict membership to law firms covered by rated providers – an exclusion which comes as the SRA considers whether to ban unrated insurers from the solicitors PII market.(Balva being the most egregious PI insurer I have heard mentioned).

Whilst this is a move that could enhance client protection, it is one that will undoubtedly force up costs for conveyancers who could have little choice but to move to rated capacity, especially if other lenders follow suit. The reasons? Whilst cutting down panel membership may be a factor, the overriding reason seems to be the transfer of risk away from the lenders themselves. As a Yorkshire Building Society spokesperson said: “Professional indemnity insurance is an important part of the package of measures we use in order to ensure that we do not place ourselves at undue risk… following the recent financial collapses of PII providers Quinn and Lemma.”

An interesting and challenging time to be taking my first steps as a broker, then. In making them, I have learned a huge amount, not just about insurance or business, but also about life in the City and the practicalities of working life: to-do lists, for example, are as vital as a coffee in the morning (having spent many years silently mocking those reliant on ‘the black stuff’ I am no longer sure how I ever managed without it.) And with that said, I just hope that the next few months facilitating your insurance desires are as enjoyable and informative as the last!