Lorraine’s Friday Tips For Conveyancers #2 Indemnity Insurance – Disclosure, Lenders and the Insurance Distribution Directive

Thankyou to everyone who read last week’s Friday tip and to those who commented!

I am going to follow up with some more comments on indemnity insurance as it is of such relevance to conveyancing lawyers.

Lenders….

I do get a bit irritated when I see a transaction being held up by a conveyancer on the other side who emails saying: ‘We will send the policy to our lender and await their comments. We cannot proceed until we receive their approval to the policy’.

Result?  Weeks of delay.

This is because most lenders will not ‘approve’ an indemnity insurance policy.  They rely on the conveyancer to approve the policy on their behalf. There are always exceptions (for example, where there is a structural defect which might affect the value of the property), but in most cases, the lender will not comment on defects relating to matters of title.  That is our job.  So, do not be surprised to receive the standard response from the lender: ‘We rely on you to protect our security’.

A post script on no approach…

I suggested in last week’s article that no approach to anyone is the best policy where indemnity insurance is concerned – and this is still the starting point and advice to be given. But I am delighted that some lovely people chatted this through and reminded me that an approach will not always preclude a policy because in some cases, conduct can be factored in.  So, it is always worth contacting the indemnity insurer even if an approach has been made as they may be able to help.  But remember to make full disclosure of all facts to the insurer!

And don’t forget the Insurance Distribution Directive (IDD)!

‘The what?’ I hear some of you say.  Well, it is another piece of regulation that came into force on 1 October 2018.  Its aim is to enhance consumer protection when buying insurance – this includes the provision of indemnity insurance products in a conveyancing context.  There are registration requirements for firms and it is necessary to appoint an Insurance Distribution Officer.  If you obtain indemnity insurance quotes from your search provider, they probably provide two quotes which will go some way to comply with the IDD.   But if this has passed any firm by, you should look into it straight away to ensure compliance if you provide indemnity insurance to clients as part of your conveyancing offering.