CLC applies to LSB for approval of new run-off cover regime
The Council for Licensed Conveyancers has written to the Legal Services Board for approval of it’s new public indemnity insurance plan.
It follows the end of the consultation on the matter, with the CLC’s proposals supported by responses from both CLC and SRA practices.
The new regime will be capped at £2 million per firm.
According to the CLC the proposed regime will:
- End the master policy scheme with its opt-out provision and move to a fully open-market approach
- Improve consumer protection by ensuring that all closed practices will automatically have run off cover in future
- Remove the financial obstacle to orderly closure of firms presented by large run off premiums payable at the point of closure
- Provide firms with improved choice of insurance through a Participating Insurers Agreement
- Reduce the compliance burden on firms by removing the requirement to seek an opt-out from a Master Policy Scheme at PII renewal time
- Streamline internal regulatory processes at the CLC, making better use of resources
Sheila Kumar, Chief Executive of the Council for Licensed Conveyancers said: “These evidence-based proposals for changes to the CLC’s PII regime are a necessary response to developments in the PII market. The Legal Services Board and OFT made clear that an open market option was required some years ago and so opt-out from the Master Policy has been available since 2011. 2015 saw significant levels of opt-out for the first time, when one-third of CLC practices left the Master Policy scheme. The CLC has to respond to that major change and ensure that its PII scheme is appropriate for the new landscape. It has also given us the opportunity to make improvements to benefit consumers and the profession.
“I am pleased that two current insurers of CLC firms have signed up to the Participating Insurers Agreement and have indicated that they will be able to make proposals to all firms currently insured by them. I hope that over time, more will follow and that choice of insurer will broaden further.
“Building run off cover into the new scheme means that firms will no longer face a major obstacle to orderly wind-up in the form of large run off premiums at the point of closure, consumers will be better protected and the Compensation Fund will face less exposure. The aggregate cover of £2 million per firm is sufficient based on analysis of claims in the past. As now, the Compensation Fund is also available should that amount be exceeded.
“These changes meet our objectives of enhancing consumer protection, supporting innovation and growth of businesses in the legal sector, and reducing the regulatory compliance burden and we hope that the Legal Services Board will confirm their approval in time for CLC practices to benefit from them in this summer’s PII renewal round.”