SRA Drops Proposals To Cut PII Cover
The news that the Solicitors Regulation Authority (SRA) decided to abandon proposal plans to lower the levels of professional Indemnity cover (PII) was welcomed by the Law Society.
Back in March 2018, the SRA proposed to reduce the minimum level of PII to improve the balance of cost and access to legal services for consumers and invited professionals to share their view.
One of the key proposals of the 2018 consultation related to the reduction in the minimum level of professional indemnity insurance cover for firms from £2m (£3m for incorporated firms) to £500,000. Those firms which offer conveyancing services would have a required minimum cover of £1 million.
Following the consultation, the SRA received criticism from The Association of British Insurers who expressed concern over the SRA proposals to reduce the minimum level of PII.
The consultation involved 160 respondents who provided feedback, the SRA commented on the responses, the regulator said:
“Feedback indicated – among other issues – that insurers might not lower premiums, or firms might not take the opportunity to lower their cover. There was also concern that if changes resulted in firms buying additional layers of insurance to maintain current levels, costs and complexity could increase. Even if costs were lowered, some thought that overall consumer protection would be reduced.”
Paul Philip, SRA chief executive, said:
“Indemnity insurance is a very significant cost for the sector, so it’s important that we periodically review arrangements, but this is a complex area with no easy answers.
“We need to make sure we are getting the balance right, so that the public is appropriately protected, while not burdening firms, and therefore their clients, with unnecessary costs. Careful, open and extensive consultation was essential.
“The feedback and market insight we received was invaluable, making it clear that the changes we were proposing were unlikely to deliver benefits for the firms and clients in the foreseeable future.”
Following the consultation, the SRA confirmed the feedback received from professionals in the industry had ‘altered its thinking’ on potential changes to its Compensation Fund rules. The regulator plan to review the proposals and will communicate any amendments in 2020.
The President of The Law Society, Simon Davis, commented on the announcement. He said:
“No other profession in the UK today offers their clients such comprehensive or robust protection.”
“The Law Society worked with the insurance industry and client groups to present a compelling case against the proposed reforms. Our consultation response was supported by many submissions from local law societies, specialist groups representing lawyers, and individual solicitors.
“With one voice, solicitors urged the SRA to maintain the rigorous professional indemnity insurance rules that protect our clients and the profession.
“PII is key to maintaining public trust in solicitors and the legal sector, which in turn underpins the rule of law and the globally recognised high standards of the legal services of England and Wales.
“The SRA is to be heartily commended for listening and taking account of the evidence presented to them and recognising that their proposed reforms would not deliver the hoped-for benefits.
“Clients, employees and solicitors would have borne significantly higher risk, and there was no evidence this would have been counterbalanced by lower insurance premiums.
“Premiums already reflect levels of risk in the work a firm undertakes, so the idea that the current system is unfairly ‘one size fits all’ is without foundation, and cost is front-loaded into the first £500,000 of cover, so lowering minimum indemnity limits to anything less than that would not have led to savings.
“The proposed changes would have radically reduced financial protections for clients and solicitors and were without merit, so it is hugely reassuring that they have been abandoned.”