PII and start-ups | Today’s transporter
The past year has certainly provided many challenges for this industry, but we must not let this overshadow the fact that we are in an exciting time in the development of property transfer services.
The last few years have seen an explosion of innovation with the development of new tools and technologies that revolutionize the home buying process, eliminate delays and uncertainty, improve customer service and, most importantly, increase safety. transactions. The digital acts of HM Land Registry and its Safe Harbor program, as well as the demands of the pandemic have massively accelerated the adoption of digital ID tools, for example, but there is so much more happening.
The changing landscape offers opportunities for entrepreneurs to create new businesses that meet consumer needs in new and better ways.
The CLC’s approach to regulation has always been to help companies understand how they can achieve the appropriate regulatory outcomes without imposing binding practices on inflexible forms of compliance. We believe this is the best way to provide consumer protection and choice. This approach could have been tailor-made for these entrepreneurs and we have seen a growing interest from very experienced carriers wanting to use new tools and processes to make a faster, safer and more efficient real estate transaction.
Professional Liability Insurance (PII) is an essential part of protecting consumers alongside regulation and maintaining high standards in the provision of legal services. Our 2021 risk agenda provides useful tips for practices on how to improve their chances of getting PII coverage cheaply.
PII has become a bone of contention in the market in recent years as companies have found it more difficult and more expensive to obtain coverage. Insurers, for their part, had reported that the market was tightening largely due to challenges in other parts of the insurance market as well as concerns about certain types of claims in connection with past cession transactions. As a result, the criteria were tightened and some companies found themselves unable to obtain coverage. This has, naturally, caused not only consternation in the industry, but also stress and worry with the next renewal season now approaching.
While as regulators we can open the doors for innovators, insurers can also effectively block market access if they are unable to provide PII coverage to these potential new business at sustainable rates. It is widely accepted that the PII market is under the same pressure to improve profitability as the P&C insurance market, but it is frustrating that this pressure has such a disproportionate impact on the legal industry when it emanates, to a large extent. measure, insurers’ heavy losses in other sectors.
There has also been a shift in risk profiling that affects new practices and change practices between regulators. As a result, there have been long delays for these companies to obtain quotes.
We have found that it is important for new practices to speak to each relevant broker to ensure they have a complete view of the market – some insurers do not have an appetite for certain types of businesses, such as independent practitioners, start-ups or businesses that were previously unregulated.
We have also heard negative feedback on models involving a significant amount of outsourcing or collaboration with real estate developers.
Insurers and regulators of course want a clear picture of the operating model of the new practices. The CLC sets the bar high for entry into its regulated community, closely questioning not only the qualifications and experience of lawyers wishing to create a new firm or move an existing property transfer practice into CLC regulation, but also the business model, financial and operational resilience, planned profitability, governance and compliance policy structures, business continuity and succession plans, transaction pipeline and growth plans.
As a result, new businesses regulated by the CLC succeed very quickly and it would be worrying if future new businesses were prevented from starting up not because they fail to overcome regulatory hurdles, but simply because of the unavailability of PII coverage.
The CLC has worked hard to support the development of a diverse and vibrant transportation sector that supports innovation and consumer choice. We hope that our colleagues on the insurance side will be able to find a way to allow start-ups and businesses to switch between regulators for quick answers when looking for cover for a business. new or evolving business. Last year’s experience was disappointing, but we hope that PII insurers will play their role in maintaining a broad and diverse offering of property transfer services through the current PII renewal exercise, and will allow new suppliers to enter the market.