Last week the SRA announced the outcome of its review into solicitors professional indemnity rules.
In summary main changes are in relation to the operation of the Assigned Risks Pool (ARP). They are:
– In October 2011 the amount of time a firm can remain in the Assigned Risks Pool will be reduced from 12 months to six months
– From October 2012 the ARP will be funded jointly by qualifying insurers and the profession, with liability for claims arising from firms who have not taken out insurance moving from the ARP to the Compensation Fund.
– The ARP will be replaced in October 2013 with a system where insurers offer a three-month extended policy period to firms who cannot obtain professional indemnity insurance for the following year. This is similar to arrangements proposed by the Law Society in its consultation response
– The single renewal date will be maintained until October 2013 to facilitate the transition
– Financial institutions will not be excluded from the minimum terms and conditions of insurance. This will be looked at following a review of the regulation of conveyancing which is due to take place in 2011. No changes will be made until the transition of ARP arrangements is completed in 2013.
Clearly the changes do not go as far as many in the insurance world had hoped, but seem to retain a high level of consumer protection to protect the publics confidence in solicitors whilst trying to reduce the high cost of that protection.
It will be interesting to see the impact of these changes on the cost of the compensation fund particularly as the compensation fund up to now has been a discretionary fund for those that have suffered hardship.
Des Hudson, Chief Executive of the Law Society, welcomes the Solicitors Regulation Authority (SRA) reforms to the Professonal Indemnity Insurance market, commenting:
“We welcome the SRA’s decision to maintain financial institution cover within the minimum terms and conditions until at least 2014 as a sensible position, both in the context of the other changes proposed and in view of the consequential harm, in particular, to conveyancing practitioners and their clients of such a change.
"We also welcome the SRA’s recognition and adoption of the Law Society’s extended renewal period (ERP) proposals as the optimal route for reform of Assigned Risk Pool (ARP) for 2013 as demonstrative of an effective consultation process. In regard to the proposals for meeting ARP liability in the 2012 indemnity year, the Law Society understands the rationale for SRA’s proposed approach and, subject to the views of Council, which will consider this important issue at its next meeting, will continue to engage with SRA on options for ARP reform both generally and specifically during the 2012 transitional year."
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