Professional liability premiums soar

An accountancy practice that is not one of the so-called "big four" firms had its professional indemnity bill increased from €50,000 in 2001 to €150,000 this year, the Institute of Chartered Accountants in Ireland (ICAI) said yesterday. The firm had no claim made against it in the year of the price increase.

The chief executive of the ICAI, Mr Brian Walsh, did not name the firm in a submission he made yesterday to the Competition Authority, calling for the inclusion of professional indemnity insurance in the authority's forthcoming study of the insurance sector.

The authority is seeking submissions from interested parties regarding the study, which it is carrying out in conjunction with the Department of Enterprise, Trade and Employment. The study is limited to motor, employer's liability and public liability insurance but submissions have been sought as to whether the scope of the study should be extended.

Mr Walsh said the feedback the institute was receiving suggested that the minimum professional liability premium for a sole practitioner had risen from approximately €600 per year to €1,200 per year.

"There have been substantial and escalating increases in premiums in recent months and ICAI is aware of increases which have ranged from 60 per cent to 400 per cent."

He said that if the authority chose to include the subject in its study, the institute could provide it with the details of practices where significant premium increases have been quoted despite an absence of claims.

Mr Walsh said professional indemnity cover was compulsory for all ICAI members and that most practices carried cover significantly above the minimum requirement.

"This creates a captive market and makes practices particularly vulnerable if insurers engage in uncompetitive behaviour."

He said the vast majority of ICAI accountancy practices were small, with 760 having three partners or less, so rising professional indemnity costs created a proportionately higher burden and a significant threat to viability.

Mr Walsh said anecdotal evidence suggested that barriers to entry and "degrees of rivalry" in the insurance sector were matters that required investigation.

He also said the study should examine legal fees being charged in professional indemnity cases, as they were higher here than in Britain. He said five insurers were offering professional indemnity cover here but a higher number were active in Britain. The incidence of claims here is lower than in Britain.

Another issue was regulatory action. "It has been suggested to the ICAI that the new, more rigorous regulation of insurance brokers by the Central Bank is resulting in fewer brokers providing services and a narrowing of the access channel to professional indemnity cover."