The SRA has announced that it is proposing to remove the single renewal date for Professional Indemnity Insurance (PII) for firms from October 2011. This means that firms would be able to renew cover at any time of the year. These changes, and other longer-term proposals, are set out in a consultation paper, which follows a comprehensive independent review of client financial protection arrangements.
SRA Chief Executive Antony Townsend said: “Although the current insurance arrangements provide excellent financial protection for clients, there is a widespread acknowledgment that they create an annual crisis for many law firms at renewal time, that they are not sufficiently focused on the particular risks of each firm’s practice, and that they are not fit for purpose for the changing legal services market.
“We believe that the changes proposed for 2011 will bring benefits for firms, helping more to obtain open-market insurance by abolishing the single renewal date — which causes problems for firms and insurers alike – and giving more flexibility over what cover is required. These proposed changes, coupled with further tightening of our management of the Assigned Risks Pool, will reduce risks and costs while maintaining client protection.
“For the longer term, we set out our views on what the regulator’s role should be, in terms of regulating in the public interest, to ensure there is sound client protection for those who need it. “These are potentially significant changes to the financial protection arrangements and it is vital that we get views from all parts of the profession, consumer representatives, insurers, and other stakeholders. Please respond to our consultation paper.“
The key changes proposed for October 2011 are: – Removing the restriction of a single renewal date. Firms will have the freedom to renew their PII cover at any time and for any period they want; – Removing financial institutions from the compulsory minimum terms and conditions of insurance (for work conducted from that date). Firms and insurers will be free to arrange cover for claims by financial institutions but this will be a commercial decision for both; – A reduction in the time allowed in the ARP from 12 months to six, and a requirement for ARP firms to develop and implement effective plans to either exit the ARP into the open insurance market or undertake orderly closure; and – A requirement on Insurers to inform the SRA about any firm who fails to pay their premiums and firms that they believe may have misrepresented information.