Elliott Vigar - head of regulation at the Law Society – on the launch of Chancery Pii...
Can you tell us a bit about Chancery Pii: who is involved in it and how is it structured?
Chancery Pii is an insurance managing general agent that sells professional indemnity insurance to one to four partner solicitor firms. Chancery Pii is a trading name of Six Clerks Insurance Services Limited, which is a joint venture between Miller Insurance Services LLP (Miller) and TLS and, from a financial services regulatory perspective, is an appointed representative of Miller (in accordance with the Financial Conduct Authority (FCA) requirements).
The Law Society will look to promote and endorse Chancery Pii and its products. Such promotion and endorsement is considered to be a regulated financial services activity and, therefore in order to undertake these activities, TLS is also an appointed representative of Miller.
As a managing general agency, Chancery Pii acts on behalf of the insurers on its panel. It is not a broker and does not provide a broking service or advice.
Why was it set up?
The Law Society has been concerned for some time about the increasing number of one to four partner firms turning to unrated insurers for PII cover. Many rated insurers have withdrawn from this segment in recent times. The gap has been filled by a succession of unrated insurers who enter for a few years before withdrawing or, worse, becoming insolvent. This is extremely detrimental to the profession.
We have made a concerted effort to raise awareness about the importance of an insurer’s financial security, urging members to consider the difference between rated and unrated insurers. We have issued guidance to members about the state of the market and offered information to better inform purchasing decisions. However, the reality is that many firms, particularly smaller firms, may not have the choice between a rated and unrated insurer. The Law Society is committed to establishing a sustainable, stable and long-term market for solicitors’ PII. With this aim in mind, we have created Chancery Pii which seeks to promote security, quality and stability.
Who is it aimed at?
Solicitors firms in England and Wales with one to four partners. This is the segment of the market that we are most concerned about; stability and the lack of available rated capacity. The Law Society provides general PII advice and guidance for all firms available at www.lawsociety.org.uk/pii and via our PII helpline on 020 7320 9545.
How long was it in the planning?
We have been working on the concept for around two years. The implementation stage commenced in January this year when we conducted an open tender process ran by the Law Society’s procurement team.
The Law Society has been very critical of brokers and has highlighted issues around commissions and tied arrangements. Can you elaborate on that?
We have been concerned about the cost and quality of the advice given by some brokers. Even where brokers acknowledge the risk of a particular unrated insurer, some will provide clients with advisory letters indicating the financial position of the proposed carrier (referred to as “chicken letters”) which we regard as unsatisfactory. Indeed, in some instances, we regard these letters to be an abdication of responsibility to properly advise on the realities of the market and options available.
The nature of tied arrangements in the small firm segments mean that often, brokers will act on an ‘execution only’ basis and only obtain quotes from their tied insurer. In these situations firms will not receive a full advisory service or advice about how to access the full range of insurers willing to underwrite their firm. We question the value of paying high broker commissions in these circumstances. This means that smaller firms may need to approach multiple brokers in order to access the full range of insurers that are willing to offer PII to their firm. Firms are also often unaware of the sub-broking chains that exist so we encourage them to ask for full commission disclosure as a way of revealing the intermediary chains.
There have been claims that the new initiative won’t solve the real issue which is that some firms cannot get terms from rated carriers. Is that fair?
Chancery PII is one option for firms to consider this renewal as part of conducting their full market exercise. We have been quite clear that each firm will be individually underwritten. Chancery Pii’s underwriting criteria seeks to enable the insurers it represents to achieve sustainable premium levels, in order to be able to offer quality products to its clients both now and in the future. This, therefore, influences the quotations that Chancery Pii offers its clients.
What are the key benefits to firms which use the service?
• A convenient online application that delivers an automatic response.
• Access to insurers with a financial rating of at least A- (S&P) or equivalent.
• Insurance placed with a panel of participating insurers.
• A dedicated team of claims managers and PII lawyers to deal with claims.
What are the long-term plans for Chancery Pii? Can you see it expanding its reach beyond firms with between one and four partners?
The Law Society views Chancery Pii as a long-term investment and commitment and is keen to assist the profession. At this stage it is for one to four partners only – the Law Society’s guidance and PII helpline is available to all firms.