SRA approves PII reform
The Solicitors Regulation Authority is forging ahead with its plans to cut the minimum compulsory cover for professional indemnity insurance (PII) from £2m to £500,000, despite strong opposition from the Law Society and criticism from the Legal Services Consumer Panel.
The SRA board voted almost unanimously for the proposed changes at its board meeting in Birmingham on Tuesday. The decision follows a six-week consultation that was described as flawed, rushed and dangerous at a recent SJ roundtable.
The regulator’s board was apparently persuaded to agree to the proposal after research suggested that the premium costs paid by firms could fall by at least 5 per cent on average but that it would have no adverse effect on clients.
SRA board chair Charles Plant said in a statement: “All legal services regulators face a challenge to remove unnecessary and or disproportionate regulatory burdens on firms in the legal sector and promote innovation, competition and growth in the market. Our reform programme aims to make the SRA’s regulation more proportionate and better targeted, while maintaining critical protections for consumers.”
The consultation received 142 responses including 90 from law firms.
“The majority of responses to our consultations agreed with our aim of reducing the burden of regulation. However, some stakeholders disagreed with the proposals we made. We have taken this feedback on board and, where we feel respondents have a valid point, we have either decided to take a fresh look at the proposals, or look for more information,” said Plant.
Several members of the Law Society have condemned the move. Former president Linda Lee warned of a ‘butterfly effect’ and said that “the reputation of all solicitors and firms will suffer” under the changes.
Voting against the reforms, Paul Marsh, another former society president and current SRA board member, said: “I am not satisfied that there is any reliable evidence that this will reduce premium levels.”
Marks Stobbs, director of legal policy at the Law Society, warned that if solicitors reduced their minimum indemnity terms, “lenders will impose their terms which could be higher” and that this may lead to firms ceasing to offer conveyancing services.
Elisabeth Davies, chair of the Legal Services Consumer Panel, said: “There were gaps and weaknesses in the evidence and we are not convinced this course of action will lower prices for consumers. In fact, it might mean consumers will lose the current level of protection without gaining anything in return.
“The SRA now needs to focus on the bigger prize: ways to make the system less risky for consumers – for example by looking at alternatives to solicitors holding client money.”
The reforms made by the SRA are subject to approval by the Legal Services Board. If agreed, the changes will be made in time for the 11th version of the SRA handbook, which is due to be published in October.
Source: solicitorsjournal
