LawCover, the NSW monopoly insurer for lawyers, tried to start up a new insurance operation that would have been outside the control of APRA. Only the refusal of the NSW Government to go along with the plan prevented it happening.

Kim Cull, the Chair of NSW LawCover, has posted a statement on the LawCover website revealing that the company’s owner, the NSW Law Society, tried to stem impending premium rises by setting up an insurance operation outside the reach of APRA.

LawCover previously had an agreement with HIH to underwrite all its PI business. After HIH collapsed the Law Society wanted to set up a new insurance business using the Solicitors Mutual Indemnity Fund, which ceased offering PI cover in 1997.

To avoid being regulated under the Insurance Act or by APRA, the society asked Attorney-General Bob Debus to introduce legislation that would have allowed APRA to give the society an exemption from the Act. Mr Debus refused, believing it would be better for the insurance scheme to be regulated by APRA.

NSW lawyers are now paying PI premium rises of up to 200% imposed on them by LawCover, which now uses American Re for its underwriting arrangements. However, a report in the Australian Financial Review suggests most rises have been much lower. Mr Debus had called for rises of at least 20% to restore premiums to reality.

A number of major law firms have switched their cover to the Victorian legal practitioners’ scheme, which offers lower premiums and is operating profitably.