The Solicitors Regulation Authority (SRA) has consulted on measures to reduce the cost of professional indemnity insurance (PII) for solicitors. It will use the findings to draw up proposals to reform client financial protection arrangements early next year.
Ideas put forward by the SRA include:
- Lowering or removing the compulsory minimum level of PII cover
- Removing sophisticated clients, such as large corporations from compulsory PII cover
- Changing the aggregation clause in the PII minimum terms and conditions (MTC)
- Reducing run-off cover
- Removing the extended indemnity period
- Removing defence costs from the MTC
Paul Philip, SRA Chief Executive, said: “PII and compensation arrangements play an important part in our regulatory model. We need to strike the right balance between freeing up law firms to grow and providing appropriate consumer protection.”
The proposals have proved to be controversial. The Law Society says that “the SRA’s discussion paper appears to be driven by a desire to reduce solicitors’ overheads. It claims cost savings but these are not substantiated.” The Law Society adds that the proposals revive most of last year’s controversial proposals for change to PII arrangements. “An unprecedented number of respondents last year objected to these proposals.”
The Council of Mortgage Lenders is worried that the proposals will impact the conveyancing market. It says that the proposed changes “will result in impacts on the make-up of lender conveyancing panels, potentially more separate representation as a result, and a move away from using solicitors in conveyancing.”
Brunel welcomes the SRA’s initiatives to reduce the cost of PII cover for Solicitors. “PII is a significant overhead for law firms. Any measures to reduce this burden, while providing a high level of protection to consumers, is great news for the profession.” said James Page, Associate Director, Brunel Professional Risks.
Brunel also welcomes the SRA initiatives for another reason. It’s longstanding view is that the breadth of the SRA minimum terms has a negative effect on the solicitor’s PII market overall, and is ultimately behind the problems some firms have experienced in the past. Please see here and here.