The Solicitors Regulation Authority (SRA) has acknowledged that the minimum levels of professional indemnity insurance (PII) cover may be too high.
It has questioned whether access to legal services for consumers is harmed due to the cost of cover or limited availability of insurance for many firms.
The Law Society Gazette says that the SRA will consider cutting minimum levels of professional indemnity insurance cover as part of a review of regulation launching in May 2014.
SRA board chair Charles Plant says: “Very high levels of mandatory cover might be considered positive for consumers, but is that the case if competition or access to legal services are harmed because the cost of such a system is too high or because insurance is unavailable to many firms? At its simplest, if you are a sole practitioner with a modest turnover undertaking relatively low-risk and low-value transactions, do your clients require the protection of PII cover of £2m, or £3m?” The full text of Charles Plant’s article on regulation is available here.
The announcement follows the SRA’s recent consultation on introducing a requirement for participating PII insurers to have a minimum financial strength rating. The consultation closed in March and the SRA board is expected to reach a decision on the matter shortly.
Russell Lane, Managing Director of Brunel Professional Risks believes the new consultation should be wide ranging. “We believe the SRA should think carefully about making insurance more accessible and more affordable for law firms. It is not just an issue of the limit of indemnity. Relaxing the minimum policy terms for PII cover would make a significant difference.
“For example if the fraud risk terms were amended or insurers were allowed to void the policy for non disclosure or non-payment of premium, many more rated insurers would enter the market. This would be the quickest way to offer more rated capacity and stable, affordable premiums for solicitors.”