NSW solicitors’ professional indemnity provider Lawcover has warned a new entrant would have an incentive to “cherry pick” lower risk practices to the detriment of smaller firms focused on conveyancing, family law, personal injury and wills and estates. 

The introduction of competition could lead to short-term savings to selected practices, while also weakening risk pooling and leaving others in claims-prone areas facing increased premiums or reduced insurance availability. 

“Driving up those premiums would be to the overall detriment of the NSW community, with reduced access to justice and/or increased legal fees,” it says in a submission to a state parliamentary inquiry looking at potential competition reforms for solicitors’ PI cover.  

The inquiry is chaired by independent MP Taylor Martin who has questioned an Attorney-General decision to decline applications by Liberty Mutual-backed ABC Insurance to provide cover that it contends will be 35-45% cheaper on average. It’s also argued NSW solicitors have been paying more compared to Victoria. 

Lawcover says publicly available information for practices earning gross fee income of less than $100,000 shows premiums for insureds under the Victoria and NSW arrangements are comparable and in many cases its premiums are lower. 

The submission says Lawcover has provided stability since the HIH collapse, operates like a mutual and is not structured as a conventional profit maximising insurer. Its constitution prohibits paying dividends to its sole shareholder, the Law Society of NSW, without Attorney-General approval. 

“The question is not whether competition is attractive in theory, but which model delivers the best long-term outcome for solicitors, consumers and the public,” it says. 

Lawcover notes it’s also the sole provider in the NT and the ACT, which operated under a competitive model until Liberty withdrew in 2021. 

A submission from Solicitors for PII Choice NSW says reforms should allow at least one additional provider for the next practising year. It says this should be subject to safeguards on premium volatility, risk-management activity and issues for the position of high-risk practices. 

“Each, in our submission, is capable of being managed by conditions of approval rather than by keeping the market closed,” it says. 

It points out that solicitors practising only in NSW are required to gain their compulsory cover from Lawcover, but those also operating interstate have choice. 

The inquiry, which has published 48 submissions, is due to hold a public hearing on Friday.

Submissions can be viewed here.