The planned consultation by the SRA on the future of Professional Indemnity Insurance does have some sensible proposals but the Law Society believes that removing work for financial institutions from the scope of the minimum terms and conditions of cover would hit conveyancing Solicitors hard.
A significant number of solicitors believe that the single renewal date placed additional pressure on insurers and brokers, which encouraged them to prioritise larger firms over smaller firms. The Society also hopes the changes will mean more insurers are encouraged to enter the PII market.
Law Society President Linda Lee said:
“Not requiring insurance coverage for commercial clients would be short-sighted.”
"Conveyancing solicitors would find themselves forced to take out additional insurance – a bitter blow at this point in the economic cycle. The extra cost could be the last straw, which drives some solicitors out of business, thus reducing consumer choice.PARA "The present arrangements provide comprehensive coverage for all solicitors’ clients, without the need to make complex decisions about which commercial clients are too large to need protection and which are not.
"However, we are pleased that the SRA has heeded our call to move away from the single renewal date. We are determined to ensure our members can take advantage of lower premiums, more choice in the market and a less pressurised renewal procedure that could result from this change."
The SRA are seeking your views on their proposed amendments to client financial protection arrangements.
The key changes proposed for October 2011 are
– to remove the restriction of the single renewal date,
– to permit the exclusion of cover for claims arising from work done for financial institutions from the minimum terms and conditions,
– to limit the amount of time a firm can stay in the assigned risks pool (ARP) to six months, and
– to clarify the requirements on insurers to provide information to the SRA regarding firms that fail to pay their premiums or may have misrepresented information.
Options open for discussion for October 2012 or beyond include:
– permitting additional exclusions of corporate clients from the minimum terms and conditions, over and above the proposed exclusion of financial institutions;
– changing the role of the ARP, possibly by ending its role as a provider of policies of qualifying insurance completely, thereby limiting its role to the provider of client protection to firms that do not have professional indemnity insurance;
– altering the way in which the ARP shortfall is funded, by considering either a direct levy on the profession or a levy as a percentage of insurance premiums;
– considering whether the functions of the ARP that remain and those of the Compensation Fund could be combined into the Compensation Fund;
– considering whether insurers should be able to cancel policies for non-payment of premiums, fraud or misrepresentation in information provided by the firm to the insurer.
Have your opinions heard, the deadline for responses to the consultation is 28 February 2011. To take part or to find out more, visit www.sra.org.uk/consultations
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