SRA reinforces its case for PII reform
Regulator says the pace of reform is 'too slow' and LSB should 'work with it'
The Solicitors Regulation Authority (SRA) has argued its case for reforms to professional indemnity insurance (PII) in a letter to the Legal Services Board (LSB).
The SRA's Board decided in July to introduce changes that would reduce the minimum level of compulsory cover previously required by firms from £2 million to £500,000.
The changes were part of the SRA's regulatory reform programme designed to ensure targeted and proportionate regulation and reduce the costs placed on firms while still protecting consumers.
The LSB, however, issued a notice on 19 August warning that it might refuse the application and requesting further information from the SRA to support its application.
As a result of the LSB's notice the SRA announced that the proposed changes would not be put in place before the common renewal date of 1 October, but it would continue with the application in order to introduce the reforms as soon as possible.
The SRA chief executive, Paul Philip, said: "The current level of cover is an arbitrary, generic level set several years ago with an un-evidenced distinction between partnership and limited liability law firms. It has been overtaken by developments in the current legal market and there is no convincing evidence that it is appropriate.
"We believe our proposals strike the balance between securing proportionate financial protection at a price which does not negatively impact on access and value. We also believe our proposals are in line with the LSB's analysis of the regulatory objectives."
Philip continued: "The primary objective in changing our arrangements is to move from an arbitrary level of protection, which in many cases is unnecessarily burdensome, to one which is both targeted and proportionate. It is clear that no single level of cover can be appropriate for all transactions in a market as diverse as the one we regulate.
"Many small firms offer services such as consumer or immigration advice where the potential loss recoverable by damages is far below even £500,000. Forcing them to obtain compulsory cover for £2m or £3m is to impose a significant and disproportionate barrier to them and to the consumers who need such advice," he concluded.
The SRA's submission to the LSB can be found here.