Probate Insurance – Friend or foe to the administering solicitor?
It is common knowledge that legal indemnity insurance has been available for the last 50 years in some form. What is baffling is why the legal profession has embraced this type of insurance for conveyancing transactions, but not for estate administration? For example, a restrictive covenant or rights of light policy, can move a transaction forward quickly and remove the uncertainty of huge potential claim costs. It is estimated that 50% of conveyancing transactions have some form of legal indemnity insurance attached to them. Why therefore has the same not happened on the estate administration side? Kate Thorp, Manager of the Estate & Inheritance Division at DUAL Asset Underwriting, who has 17 years’ experience in insuring estate administration matters, has some thoughts on this.
“Firstly, I admit that the insurance market has not helped itself. Premiums for any type of estate administration-related insurance can often be eye-wateringly high, compared to the sum being insured. Secondly, risks showing the slightest sign of being contentious are often declined by insurers. Since DUAL started writing estate administration insurance over two years ago, I have had a flood of contentious enquiries land on my desk, showing that there is a need for this insurance protection. We felt it was definitely time to turn the market on its head and give it a much needed shake-up.
“Unfortunately, I believe another more concerning reason for the low levels of insured estates, which I come across on a weekly basis, is some solicitors’ reluctance to seek an insurance solution to resolve a dispute or issue. Despite knowing there is an alternative to freezing the administration and incurring additional costs, for which the client ends up paying, many solicitors remain unwilling to use insurance to bring the matter to a conclusion at a reasonable cost. Unfortunately, all that happens is the inheritance value shrinks and the client becomes more and more frustrated about how long the process is taking and how the costs are mounting up.
“In a recent case, an old letter found in a dusty attic suggested the deceased had fathered a child in a foreign country many years before. No other evidence existed to verify this and there was nothing to suggest that the child had ever been in contact with the deceased. The premium to insure this standard risk would have been a few hundred pounds at this stage. Instead, the solicitor hired a researcher and sought Counsel’s Opinion, delaying the estate administration at what must have been a cost of thousands of pounds. As contact had now been made with the purported child, all other insurers declined the risk, however we still offered cover, but at a substantially higher premium. In another example, I was told by a solicitor that they would not be recommending insurance to their client where the estate distribution had been held up due to an unfounded claim which had not been withdrawn, because it may take work away from their own in-house contentious probate team if the matter escalated in the future.
“I admit, insurance is not always the solution, but, where an insurer can help and offer an alternative to the estate administration stalling for months and sometimes years, usually for a fraction of the cost of litigation and solicitor’s fees, should the solicitor put their client’s needs first? I repeatedly hear the argument that solicitors have a duty to administer the estate correctly and find any entitled beneficiaries, but they also have a duty to resolve problems within reason. This surely includes considering insurance as an option, to enable the estate administration to move forward to a swift and satisfactory conclusion. We in the insurance industry have long since had to work within a “Treating Customers Fairly” environment and providing a safe option to bring matters to a head, should also be amongst those options presented by the solicitor to their client, once thorough legal work is complete.
“Of course some readers will say “well you would take this view wouldn’t you, because you are an insurance underwriter” but these aren’t just my views. As many of us know, one of the key recommendations of the Legal Services Board’s review of will making and estate administration in 2011 was that it suggested that new regulators in this space engaged with the insurance community to explore options for no-fault, transactional insurance, that consumers had the option to purchase, when engaged in will-making and estate administration.
“This approach should never be used as a substitute for best quality legal work, but when that has been done, to the best of the professional’s ability and there are still obvious historical gaps and risks, why not try and move things forward with a more modern, commercial solution?
“Fixed fee probate companies are increasing their share of this market and also have the budget for TV advertising campaigns. With accountants now also becoming authorised to deal with estate administration, it’s time for solicitors to embrace insurance before it is too late. Insurance is not taking work away from them, but instead offering the best service to their client. This could also free up their valuable time to take on more business and more clients. My message is: embrace insurance rather than seeing it as the enemy. The insurance market is changing, perhaps solicitors should follow its lead.”
This article was submitted to be published by DUAL Asset Underwriting as part of their advertising agreement with Today’s Wills & Probate. The views expressed in this article are those of the submitter and not those of Today’s Wills & Probate.