I want to take the opportunity to respond on behalf of the Law Society to some of the comments that have been made in response to recent articles in the Gazette about PII, and to clarify our position. I want to do so to rebut some of the more fanciful criticisms made of the Law Society, to set the record straight, but also because I and everyone else at the Society recognise the importance of this matter to so many of our members.

We are very much aware of the problems faced by some practitioners, particularly sole practitioners and small firms, in obtaining PII this year, either for reasons of cost or through not having received a quote at all. It is clear, though, that this is not a problem affecting all sole practitioners or small firms, many of whom have reported that they have obtained cover in good time at a satisfactory if increased price. The Law Society is concerned that no viable firm should go out of business as a result of a failure to obtain PII cover.

To provide some background, we made the assumption that this renewal period would probably be as tough as last year, if not more so, and so we have been engaged in discussions with qualifying insurers, brokers and their trade bodies, the ABI and BIBA, since the start of the year. We have also published advice and guidance, run national seminars and webinars, and set up a dedicated helpline to assist solicitors, which has fielded more than 1,000 calls since its inception in the run-up to the renewals period.

This week we have expanded our helpline service to assist firms that have fallen into the assigned risks pool because they were unable to obtain cover before the renewal deadline. We contacted indemnity insurance brokers and asked them to assist this initiative. A number of them have pledged their support. We are encouraging firms that have not as yet been able to secure insurance from the market to contact the helpline on 020 7320 9545, or by email at PII@lawsociety.org.uk, so we can refer them to these brokers.

However, we cannot dictate to the market – a market that the profession voted to enter some nine years ago and which has seen a marked reduction in the total premium pool (the total of premiums paid by the profession) since the demise of SIF. In 2008, these premiums amounted to £226m; in 2000, the final year of SIF, the corresponding figure was £255m. The Law Society has no power to require qualifying insurers to quote or tell them how much to charge – they are private commercial concerns. This is the essence of a market. The profession benefited while the market was ‘soft’ and insurers sought business. It follows that when the market hardens and insurers become more risk-averse, premiums rise and the risk profiles and indeed risk management of firms come under greater scrutiny. It should also come as little surprise, and indeed has been the subject of much publicity this year, as to where the greatest risks, according to insurers, would lie.

The Law Society is charged with ‘letting this happen’ and being asleep on the job. Nothing is further from the truth.

We have no power to amend the rules around the single renewal date, the minimum terms or the ARP – that is for the SRA alone, as the ABI and others are well aware. It is wholly unjustified to suggest that the Law Society has ‘let this happen’ – we had no power to stop it.

There were many calls for an extension of the deadline from 1 October. Again, this is not within our gift. Nor indeed is it in the gift of the SRA. The date is set out as mandatory in the Indemnity Insurance Rules and is not subject to discretion.

On the issue of more time, I should point out that a protective application (to avoid defaulting into the ARP with a 20% premium penalty) to the ARP allows, at the discretion of a qualifying insurer, for cover to be backdated 60 days to 1 October with no financial penalty. We therefore issued detailed guidance to the profession about that on 25 September. Further details are available on our website.

Contrary to some views expressed, we are not ‘uncaring’ nor have we just ‘woken up’ – there is, however, a manifest difference between awareness of a problem and the capacity to change markets and market reality at will.

Earlier this year, in anticipation of a hard market, we sought to negotiate a tripartite agreement between TLS, the ABI and BIBA on a code of conduct and mutually acceptable and widely applicable standard letters of retainer, guaranteeing minimum standards of service and requiring responses, updates and quote/no quote decisions within set time periods. We felt this would hold all parties, including solicitors, to account and allow for timely business decisions to be made. These proposals were rejected by the insurance industry, which in this regard prefers, it seems, on the one hand to rail against the current system but on the other seeks, in the view of some commentators, to manipulate it and a hardening market for its own benefit.

This response from the ABI and BIBA was particularly disappointing. Indeed, allegations we have received from our members suggest that some qualifying insurers, which have (in the face of their previous endorsement of a ‘go to market early’ policy) left proposals unanswered until the last minute, if at all, and have given firms as little as hours to take or leave a quote. They have then ramped up premiums dramatically from last year with no warning and little apparent justification. In combination this amounts to the proverbial ‘gun to the head’.

We are aware that the ABI in particular is lobbying for change in the way that PII is handled. The Law Society has sympathy with some if not all of its concerns. Indeed, from our own independent analysis and with due consideration of the implications for the profession, the SRA and the insurance industry, we take the considered view that in principle, the single renewal date could be removed in place of a variable system. The independent report by consultant actuaries Lane Clark and Peacock LLP can be found at www.lawsociety.org.uk/new/documents/2009/pii_insurance_laneclarkepeacock.pdf. Proposals in this regard go before our Regulatory Affairs Board shortly.

We have been, and continue to be, prepared to engage with all players in the insurance market to design a system that benefits all parties moving forwards. However, we cannot countenance market practices that hold parts of the profession to ransom. The Law Society will do everything in its power to address the problems emanating from this renewal period and will seek to influence those who can effect change for the benefit of the profession.

Des Hudson, chief executive, the Law Society