Conveyancing – is the reward worth the risk?
15th September 2015
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!