What is the dirty little secret of Insurance?

There are hidden clauses that loom large in policy documents and some are more sinister than others. Here I explain what the secret is, why it is dirty and how it’s still a secret.

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What is insurance companies dirty little secret?

The insurance market has a reputation of escaping from legal contracts using small print.

When businesses have a dispute they often seek legal recourse. The complainant will sometimes have insurance to cover such disputes. They ask their insurer to cover the cost of taking action yet policies prevent insurance buyers from taking action against insurance companies. Not much help if an insurance  company has refused  to honour the policy they issued.

Insurers do not make this clear. It’s difficult enough when commercial disputes arise, it’s galling to find that you have been given a false impression by the people you had invested in. Insurers paying claims want to reduce the most obvious or exclude them.  It’s unfair when the exclusion prevents you taking action against a supplier that has obviously got something wrong – as is often the case when claims are badly handled. But for insurance companies to close ranks in this manner, that’s pretty low. Whatever their reasons.

Why it is dirty?

Because it’s industry wide, it’s tantamount to a cartel. Have all insurers secretly agreed that they will support claims against any industry except their own? If not, why hasn’t an entrepreneurial insurer stuck their head above the parapet and issued a policy that covers taking such an action?

Insurance disputes are common and it’s not always the broker that makes a mistake. Insurers are often culpable yet it costs almost £20,000 to take action against them. That is bad for UK business. Of course, it could be down to the fact that the insurance actuaries have worked out that insurers nearly always win cases. I suspect this is because complainants often run out of money to fund their legal case. If I’m right the figures will always be skewed.

Why it’s a secret?

I doubt if insurance companies place this exclusion at the back of their policies by accident. It’s not front and centre as you would expect such a sweeping exclusion to be.

There are other secrets in policies that are difficult to unearth and comprehend. Yet the dirty little secret of not allowing your client’s to take action against your competition is the most sinister show stopper.

Wrap up: Insurance companies do not pay claims when the insurance contract between them and their policyholder has been breached. If they refuse to pay a seemingly valid claim policyholders need to dig deep to ensure they get what is due to them. 

Top Tip: Spend time assessing the key risk to your business and make sure you understand your insurance policies which are legally binding contracts. Make sure that important contracts and agreements are not excluded from your policies.

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Solicitors frustrated by broker tactics

Now silly season is upon us, I thought I would update you on what is actually happening in the solicitor’s indemnity market. I know quite a few solicitors and I understand their frustrations. Rather than wax lyrical, I’m going to stick to the good, the bad and the ugly in the current market.

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The good

There are a lot of hard working brokers out there who are satisfied that they have strong enough relationships with their clients and are not using “hard ball” tactics to scare their clients into renewal. You probably have one of those on your side and your terms and conditions will be reasonable.

Ensure you provide full and detailed information when requesting your renewal terms.

The bad

There are two realities to explain. A solicitor received his form, returned it and was given terms within 48 hours. He was also given 7 days (make that 5) to make his mind up. That’s not even legal.

Another practice (with the same supplier) has incorrect “claims” on the practice’s record and the supplier is refusing to correct them. Naturally, they are worried that the terms will be provided late and prove onerous.

The ugly

Some practices (mainly SP’s) have been refused terms by their current insurer already and are filling out forms (more in desperation than hope) whilst considering their future if they cannot find cover. Their supplier should have helped them with the complicated forms.

The reason for declinature is not being made clear or doesn’t add up. One broker refused to tell their client which insurance companies they had approached. That is not service as it leaves the policyholder with no real options.

Wrap up: Some suppliers are great at maintaining relationships and have secured excellent terms. Others are playing hard ball when they do provide terms, taking advantage of the fact that the competition need time to offer an alternative. Some are being obstructive or abandoning clients they cannot easily help.

Top Tip: If an application is declined request a detailed reason before applying elsewhere.

Litigation expenses insurance – Before or after?

Insurance for legal expenses has evolved along with CFA’s. Client’s may prefer the new “hybrid” offerings that allow them to pay later. Timing is of the essence and there are ways to attract the most favourable rates.

Insurance as an investment

Appropriate policies are an investment if set up correctly. Some insurance companies will accept payment of the premium after the case is concluded and they have a variety of ways to ensure that it is paid. Typically, client’s that have already assessed they have a good chance of winning the case before approaching the insurance market receive the best terms.

It’s important that the terms and conditions of the policy dovetail with other agreements. Only then will the policy pay out, return on investment is guaranteed when everything is in order. As long as the policyholder is aware of the terms and conditions, so they know exactly where they stand.

Interpretation is everything

Insurers will not issue cover without undertaking a thorough review of the circumstances. Provide them with a good case backed up by counsel’s opinion and they will respond accordingly. Investing time at this stage will ensure terms and conditions are favourable.

No two policy wordings are the same so interpret the terms in the worst possible light to exclude shades of grey. If it sounds like it isn’t covered, it probably isn’t. The brochure will paint a picture, the policy wording is the High Definition document.

As an independent broker I am (almost) professionally obliged to say you should refer to an independent broker. Be that anyone you choose, they will be able to interpret the policy conditions and the manner in which different insurance companies handle settlements. Each quotation should be judged on it’s merits.

Timing is of the essence

The earlier you apply for a quotation the better. If clients are relying on After the Event Insurance it is more expensive and restrictive than annual arrangements. As soon as you hear about a claim encourage the participant to at least consider cover. They may already have cover attached to another policy yet it will only apply if a notification is made early.

Delayed applications could mean increased percentages of awards being deducted from your costs or the clients award – if there is one. An insurance company will ensure it receives it’s premium. Where it comes from is up to the applicants.

Wrap up: Insurance is a prudent investment for strong cases. Terms and conditions from a range of providers can be assessed quickly and easily by an experienced eye. A strong case presented early will attract the most favourable settlement terms.

Top Tip: Don’t search the market yourself if your time is worth money.

Solicitor’s professional indemnity concerns

Some solicitors are still punch drunk from last year.

With fewer insurance companies offering cover this year solicitors need more help than ever. Some are rolling with the punches, others have already given up. Here are the options including the good bad and ugly.

Last year the renewal season lead to the dreaded ARP charging solicitors 35% of turnover just to stay in business. Since then, Quinn has proved unreliable and their biggest supporters in the broking community are scrambling round the market for a viable alternative.  The Law Society Gazette reports that mergers are on the up and “the biggest driver over the next few months will be the professional indemnity insurance Read the rest of this entry

Professional Indemnity Insurance – Discover how to avoid losses

Professional advisers are not always protected by their insurance

Want to know why some indemnity insurance claims are declined? I have two examples of claims being declined, one more extreme than the other, yet both prove small errors can prove costly. And I’m going to tell you why they were declined and how to avoid it happening.

The first is the most recent, only a few months ago an insurance company refused to cover a claim for a company that was being sued for £47,000. The claim related to an incident that occurred in July 2005 when they had translated a document (allegedly incorrectly) yet it would have been covered if the insurance company had been made aware of it earlier. Read the rest of this entry

Why is solicitors indemnity insurance so expensive?

Legal eagles will be trying to get the best deal for their solicitor’s indemnity insurance in the next 5 weeks. All policies fall due for renewal on the same date so it really is “silly season” when every solicitors insurance in the UK has to be sorted out at the same time. This common renewal date isn’t going to change anytime soon so I’m going to try and explain why it’s important to you, the causes and how solicitors could avoid unaffordable increases. Read the rest of this entry