Solicitors' PI rates 'hardened by mortgage fraud'

11/04/2008

The professional indemnity (PI) market for solicitors is likely to harden due to increased claims of mortgage fraud, it has been suggested.

Writing in Insurance Times, Lauren MacGillivray notes that an increase in claims of fraud made against solicitors is likely to see PI costs rise.

She notes that risk management firm Legal Risk is currently working with two legal practices facing more than 260 "cases of concern" between them.

Meanwhile, the Solicitors Regulation Authority (SRA) received 293 complaints of mortgage fraud in 2007 - up from just 85 in 2004.

A spokesperson for the regulator advises that incidences of mortgage fraud are more likely to come to light in a climate of falling house prices.

He tells the publication: "If a property is deliberately over-estimated and the lender lends too much money, it's OK if the property value goes up."

"But it's noticeable if the price plummets," he adds, which could see a greater number of PI claims develop from solicitors in light of the current difficulty in the housing market.

The news comes as Halifax has published its latest House Price Index which reports a monthly drop in property values of 2.5 per cent.

Should the SRA's warnings materialise, an increase in claims and consequential hardening in solicitors' PI rates may be expected to follow.

Marc Riches, a Director at Lloyd's Broker PYV Legal, said: "Now is the time for practices to take a good look at their exposure to allegations or claims of this type, and make an assessment as to whether the level of PI cover the firm has is adequate."

He continued: "Don't forget that a PI policy is designed to cover not just the financial amount of any claim but also the costs and expenses incurred in defending a claim - an important point to consider if you have a large conveyancing book conducted in a rising housing market - contact us if you have any concerns."

PYV are one of the UK's leading providers of professional indemnity insurance. This news article has been produced by Adfero in collaboration with PYV and its unauthorised use is not permitted.

(c) 2008 Adfero Ltd.

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