LPM

COLUMNS APRIL 2016
A MESSAGE
SPONSORED EDITORIAL
FROM THE MARKET
JANINE PARKER, THE BROKER
ABOUT
Paragon
Better broking for legal
Contact Janine on:
020 7280 8200
www.paragonbrokers.com
With the April renewal nearly complete, initial
feedback is that rates continue to decrease and
premiums continue to reduce. As the echo of
2005 resonates sharply, it prompts the
question: how much longer can this continue? In this article
I will consider a general view of the insurance market and
try to suggest where we might be headed.
Mergers and acquisitions in both the underwriting and
broking community continue at pace. The result is that the
dynamic of our market is changing. Whether they're brokers
or insurers, merged companies seek efficiency savings to
balance the books after acquiring a company. This takes
time and is often disruptive to a business when companies
with different cultures have to jostle for position in the new
entity. Staff unrest is not unusual, and sometimes the
underwriting of risk can temporarily take a back seat while
more pressing operational challenges are addressed.
Likewise, for brokers, the constant fear that any
rationalisation programme may mean the loss of your job is
a harsh environment to work in, and certainly work in at
your best. Yet, across all classes of business in the insurance
market, rates continue to soften and customers are
benefiting from this. The number of brokers has perhaps
reduced as a result of merger activity, but new insurers
continue to enter the market, meaning an abundance of
capacity and the ability to keep pricing low. Interest rates
are low, so insurance is still an attractive investment
opportunity for those seeking a consistent return on capital.
But what happens when interest rates start to rise,
whether this is tomorrow, in a year or over the next five
years? What happens when more attractive investment
opportunities present themselves and the availability of
capacity begins to slow? Less choice would be the logical
assumption. Fewer insurers, fewer brokers, less competition
– will this lead to higher pricing? Perhaps. Perhaps not.
To return to the PI market, can this level of pricing cover
the current claims and those that will manifest themselves in
the future? There are rumblings that certain insurers are
considering their position in our and other similar markets.
The nature of insurance is cyclical, and solicitors in particular
have experienced the rough end of this. Insurers will be
acutely aware of what happened in 2007 and 2008 and will
be wary of walking into the same problems that came from
having under-priced books of business in 2005 and 2006.
And with the rapid development of cyber fraud, there is a
further issue that must be tackled. It is worth noting at this
point that despite numerous warnings, insurers are still
paying significant claims for monies disappearing from
client accounts due to cybercrime. Whether it be an email
hack or a phone call, this often results in a large PI claim
where monies cannot be recovered.
Any change of bank details, whether communicated by
phone or by email, must be re-verified with your client. Even
when the email or phone call appears genuine, always check
and check again. It will be on your claims record for many
years to come.
On a positive note, there are rumours of new entrants
coming into the market this year. These are not usually
announced until May/June, prior to the renewal season, but
any additional competition, certainly in the short term, can
only be good for the profession. As always, do all you can
to ensure your claims record remains good as, should the
market turn, it is this that insurers will be focusing on. LPM
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LEGAL PRACTICE MANAGEMENT