What Next for Solicitors Professional Indemnity Insurance?

It’s difficult to think that it is now 22 years since the Law Society closed the Solicitors Indemnity Fund (SIF) and created a commercial insurance market, what is almost equally baffling is that 22 years later the legal community is still talking about whether it was the right thing to do!

So let’s be clear the cost of Professional Indemnity Insurance is higher than it has ever been either in the commercial market or under SIF (read should we go back to SIF). We should however remember in the last 22 years risks and claims against Law Firms have changed significantly. For instance 22 years ago, could you have imagined the Dreamvar ruling (for those of you who haven’t read it, simply put you can now have been seen to have contributed to the negligence of a third party law firms failure to undertake appropriate ID checks)?

I was asked this week to comment on a Think Tank report on the adoption of (or need to adopt) technology in law firms, and specifically Inperio’s tie up with Thirdfort around Digital ID checking, which made me think why doesn’t the legal industry naturally evolve without being pushed and pulled to move forward.

At the demise of SIF one wouldn't have consider the Dreamvar ruling, nor would we have considered using a mobile phone linking our banks, our photo and our passports together to check our ID. While the insurance industry is paying the claims of today (such as Dreamvar), it seems to me the legal industry is as a whole still operating the same way it did 22 years ago. So it is not a surprise that there is a mismatch between price expectation of law firms and the costs Insurers need to charge for the claims they have to pay.

The only way it would seem to stop this price spiral is to adopt technology solutions which mitigate the risks faced by law firms. In moving a legal practice forward and reducing these risks inevitably claims will reduce and premiums will come down, and only then might we stop talking about solicitor PI Insurance and it’s costs.