Modern insurance is thought to have started in Genoa around the 14th century. The big break came in the 17th century London mercantile market, in a coffee house run by a certain Mr Lloyd, way before Costa or Starbucks.
Over time the basic principle of insurance turned on ‘utmost good faith’ and ‘my word is my bond’. A hand shake secured a contract. Simple contracts were set out showing terms and conditions, the insurers looked it over and if they agreed, they signed at the bottom and so the term ‘underwriter’ was born.
In our modern world we have complicated the business (compliance and litigation) with quotes, (very) long wordings, subjectivities ad infinitum now the norm. Does ‘upmost good faith’ still exist?
We certainly hope so, Underwriters issue quotes once happy with the application, clients then sign the quote agreeing the terms and a contract is made. If someone then changes their mind, all trust is lost and it is difficult to maintain and rely on relationships.
A London newspaper recently highlighted a company’s plight and declined insurance claim, all because on a hot day a door had been propped open with a fire extinguisher. The extinguisher, we think, was returned to its proper place but the insurer dismissed a subsequent claim on the basis of this improper use and technical breach of terms and conditions, despite the claim being caused by something else.
Utmost good faith is therefore still essential: we need trust between insurers, insureds, brokers and solicitors, if people have a policy of insurance, they must be able to rely on it. I think of insurance as ‘a sleep easy’, if I doubt its reliability how can I ‘sleep easy’?
We here at QLP really do believe in the principle of utmost good faith, without it the insurance industry suffers and is devalued. As brokers we continue to have an important role making each side adhere to contract terms, long after the event of the sale (no pun intended).

Whiplash has always been controversial, in September for instance, we know of a case where of 4 people make a claim against a lorry driver after he crashed into the back of their car. Unfortunately for the claimants the driver had a video camera in his cab. It showed the car deliberately swerving in front of the lorry causing the crash. Case finished.

There is a perceived problem with whiplash. The newspapers carry stories about how much we pay from our car insurance premium to cover the cost of whiplash. The Rt. Hon. Jack Straw MP has been vociferous in his condemnation of whiplash claims.

So, I suppose it was only to be expected that the Government would come up with a ‘solution’. The Ministry of Justice (MoJ) has started (and by the time you read this, finished) a consultation on a new IT solution. A new Government IT system working and on budget, (if only), that would be a surprise. A new company will be formed and it will be independent (MedCo).

Anyway to detail, claimant solicitors will be able to check a client’s 5 year ‘whiplash history’. This magnificent new system will also be able to allocate medical experts to claims. This super dooper new company will also be responsible for a mandatory accreditation scheme for medical experts.

The whole new system is being funded by the Association of British Insurers (ABI) and ongoing funding will be paid for by accreditation fees.

There will be set fees for all, ranging from £180 to £420 for reports which seems a little optimistic for a consultant’s report. If we are not careful a new sausage machine will evolve , with the consequent lowering of standards.

In an effort to ensure fair play, there are complex rules about ownership of companies supplying medical reporting services. It seems that already we are in danger of disappearing somewhere very unpleasant.

Let’s look at the other side of the coin, a nasty solicitor firm can own an ‘expert’ company but is not allowed to use it for their clients. However the firm (MedCo) that runs the system and runs the expert accreditation system is on the side of defendants, no conflict of interest there then!

So a quick question, does anybody think that any savings this new system makes will be reflected in our car insurance premiums? If you do, I hope Father Christmas brings all your wishes this festive season. Less than 70 shopping days until the big day!

Here at QLP we are coming to the end of the Solicitors’ professional indemnity season and looking ahead, what next? Well the obvious answer is Christmas!

But on a more cheerful note, what is happening. Here at QLP we have put in a new computer system. Re done the wiring even have new chairs but everything seems the same. Good news I suppose, nothing has broken down(yet!!!)

So what challenges does all the new kit face?

Over the years we have settled into a nice easy system of working, all the little kinks have been ironed out and life was calm. Then things started happening, Jackson came into force and nothing was left untouched. To be honest the post Jackson world was fun, new avenues had to be found, all the old certainties went, business was much more a rollercoaster.

18 months down the line, new ideas are in place, underwriters come and go, new faces are everywhere. There has been a lot of innovation, new ideas, policies etc.

I think the main thing to come out of all the turmoil is ‘the answer is never no’. As lawyers come up with strange requests, a little thought and a conversation with an underwriter can sometimes produce a new angle on an old theme.

For example, direct access to barristers, most underwriters automatically say no, why? Secondly, some underwriters say that their premium would be disproportionate in a case, as the client pays the premium, surely it is their decision. If a case is likely to succeed, should not the client have the right to justice?

Today we are very nearly back to where we were before Jackson in terms of cases and policies. For smaller cases we now use schemes, ‘if it fits the criteria it’s in’, think of it as a sausage machine.

For larger cases, clinical negligence, commercial etc. it is now possible to insure and provide funding (cash!) to help run the case. This can remove pressure on the firm’s balance sheet (both lawyer and client)

The rule going forward must be, ‘ask otherwise the answer is always no’.

If the above is not enough, as I said earlier, it’s nearly Christmas!

According to a recent poll only a quarter of people with a viable compensation claim (this was not defined and there is no way of telling if “viable” is one which a solicitor would run under a CFA or a broker think “brokable”) actually go on to make a claim. Quite how this balances out with the same media forever telling us that the compensation culture is overwhelming the country I am again not sure. I am sure that a proportion of our car insurance premiums do go towards paying off whiplash claims.

So what is actually going on? As usual, I think the answer is somewhere in the middle. We all know that bad news is good news for newspapers and the rest of media, so we hear all about fraud, people over egging their injuries and lavish awards paid out for what seems trivial reasons.

It needs to be said that, in our experience, the vast majority of cases are honest, settle at reasonable levels and help the claimant. It’s not ‘free money’ and not seen as such by claimants who need help to recover after accidents, adjust to new circumstances, to put themselves back to the position before ‘it’ happened. Often the only way to do this is via the courts, this costs money!

All the hoo-hah about huge fees and premiums paid to lawyers and insurers ignores the actuality that, these are paid to firms who: employ people, pay tax and national insurance, pay rent and rates, pay claims (insurers) and many other ‘incidentals’ that keep people in employment, who in their turn contribute to the economy and UK plc.

This is about more than the purity of the law, it is also a business and justice does need to be seen to be done.

Therefore do not despair, we should keep going, we all make a difference and in some cases if we did not do as we do, there would be a distressing number of injustices for the media to highlight and complain about.

This is a real ‘downer’ of a blog but remember we do a useful job, we help people who are in trouble, this cannot be said of some of the detractors but they have to make a living as well.

As we come to the mid-point of the PII season, I thought I would review how things are going.

Anecdotally is appears that the SRA’s mooted reduction of limits of indemnity (LOI) to £500,000 has led to firms holding off renewing at the usual £2/£3,000,000 perhaps anticipating premium reductions. As we all know this is not going to happen, firms will need to renew for their usual level of minimum cover.

Policies are written on an “each and every claim” basis so the LOI covers an unlimited number of losses during the period of insurance. Outside of the very large firms, it is (just about!) unheard of for an insured to, say, have three total losses. What is much more likely is a series of smaller losses measured in the few £’000. Therefore, do the majority of UK law firms really need to have such high levels of cover?. As a ‘sop’ to both insurers and solicitors the bigwigs at the SRA have had the idea that allowing firms to insure at lower levels will reduce premiums and insurers’ exposure to potential costs. ‘Win win’ for all apart from maybe the consumer.

I cannot find any reliable statistics for claims reserved and claims paid but using our experience here at QLP, few claims exceed £500,000 and indeed most settle below £100,000.   Underwriters will already have factored this into their premium calculations (fees, claims experience, areas of work) and any subsequent reduction in the compulsory LOI is unlikely to have any bearing on premium levels.

From a personal point of view, I would rather be over insured rather than under insured. Most people need some sort of insurance and hope that no claim is made as it means something has gone wrong. Having said that, in a claim situation I have never known anyone to say the premium is wasted?

Ultimately PII is a financial tool that protects the assets of a business, in other words your wealth, particularly if you are part of a traditional partnership. It also gives comfort to those using lawyers that if anything goes wrong, there is a means of compensation. Certainly it is common practice for solicitors’ corporate clients to take an interest and ensure their legal representatives are adequately covered.

We all know claims come from the most unexpected sources and can bite hard. Maybe, just once in a career, along comes the biggie. Full cover is a sleep easy, I am covered, no need to worry (well not about that anyway, plenty of other subjects to fret over).

MARKET UPDATE

Competitive quotes all around, if anything the running is good to soft (to use an horse racing term) with renewals around about last year’s levels, assuming things have not gone pear shaped over the last 12 months and you are getting the benefit of your premium.

N.B. The Law Society has commented that solicitors should not delay their Professional Indemnity Insurance (PII) renewal this year. Have you?