A NSW parliamentary committee will examine the potential to introduce competition into the market for solicitors’ professional indemnity insurance.

Independent MP Taylor Martin will chair the inquiry, and the terms of reference include settings resulting in Lawcover being “an effective monopoly provider”, current pricing and opportunities to drive competition via market entrants.

Mr Martin told parliament NSW’s solicitors pay more for cover than Victorian counterparts but the Attorney-General has declined applications by Liberty Mutual-backed ABC Insurance to provide cover that it contends is broader than Lawcover’s and 35% to 45% lower-priced on average.

“Whatever view members take of that specific claim, the pricing gap between jurisdictions alone is worth our attention,” he said. “There is also a governance question that the inquiry should test.”

The Legislative Council’s motion to create the select committee was opposed by Labor, which unsuccessfully moved an amendment for the inquiry to report by October 7.

Labor’s Emily Suvaal said Lawcover has brought enduring stability to the market in the aftermath of the HIH collapse and the Attorney General considered extensive advice when deciding not to approve an alternative professional indemnity offering.

“Traditionally, competitive professional indemnity insurance markets in Australia and the UK have been volatile and unattractive markets for insurers,” she said.

“Practitioners in those jurisdictions have also endured significant premium fluctuations, difficulty obtaining coverage and insurers that exit the market with little advance warning.”