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Higher indemnity premiums for small firms

23 September 2008

Most small law firms expect their indemnity premiums to rise this year, a survey of 100 firms with between three and 10 partners has found. A total of 60 per cent said their premium would rise, compared to the three per cent who thought it would go down. The remaining 37 per cent expected their premium to stay the same.

The survey, by the professions arm of Heritable Bank, indicated that 88 per cent of small firms had saved money throughout the year to fund their indemnity insurance.

Nick Sanders, managing director of Key Business Finance, said that concern that the level of claims would increase on the back of a falling property market was behind the hardening insurance market. He said increases of around 10 per cent were common.

“In previous years prices have been static because of healthy competition and an over-supply of insurers,” he said.

“Now some of the smaller insurance companies have pulled out, who worked particularly with small law firms. The feedback from brokers and clients is that the market is fragmenting between those with exposure to conveyancing and those without.

“Some firms will be facing higher insurance costs just as their revenues are falling.”

Sanders said 97 per cent of his firm’s lending was to law firms, and more than half had less than ten partners.

He said that almost £250 million had been lent this calendar year to around 1,500 firms.

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Commercial