Proposed changes to the Solicitors’ Professional Indemnity Insurance and Compensation Fund
Proposed changes to the Solicitors’ Professional Indemnity Insurance and Compensation Fund
The Solicitors Regulation Authority is consulting on proposed changes to the Professional Indemnity Insurance set up and their Compensation Fund rules.
See https://www.sra.org.uk/protecting-legal-users/
However, the Law Society regards the proposals as a bad move`(7 June 2018). See Part 2 and http://www.lawsociety.org.uk/news/press-releases/solicitors-clients-at-risk-insurance-cover-slashed/
The SRA aanouncement states:
“PII and Compensation Fund
“What we are trying to do
“We are consulting on proposed changes to Professional Indemnity Insurance arrangements and our Compensation Fund rules
“Who needs to know
“Everyone working in a firm we authorise and/or regulate and users of legal services.
“What’s going on
“We make sure there is a minimum level of financial help available if a solicitor, or an individual working in a firm we regulate, is dishonest or incompetent. We do this in two ways:
Requiring that all the firms have a minimum level of Professional Indemnity Insurance (PII).
Running the Compensation Fund, which is available to eligible applicants when other avenues of redress have been exhausted.
“Now we are consulting on changes make sure people get the right level of protection, and in turn benefit from a more competitive marketplace and increased choice.
“Our PII proposals will give firms more flexibility to choose the right level of insurance to suit their business and clients. These include:
Reducing single claims limit from £2m to £500k (£1m for conveyancing when needed).
Keeping the need for a six years run-off period but this would now include a cap.
Removing the need for cover for large commercial clients.
“Our Compensation Fund proposals are designed to make sure financial support is focussed on those most in need of help. These include:
The maximum payment being reduced to £500k.
A hardship tests for all claims.
Tougher assessment of all claims validity.”
The Law Society response (7 June 2018) to the proposed changes by the Solicitors Regulation Authority to Professional Indemnity Insurance set and Compensation Fund is as follows. See http://www.lawsociety.org.uk/news/press-releases/solicitors-clients-at-risk-insurance-cover-slashed/
“Cutting back mandatory professional indemnity insurance (PII) for solicitors would be bad for partners, law firm employees and clients alike, the Law Society of England and Wales said in response to proposals to a Solicitors Regulation Authority (SRA) consultation.
““The proposals would radically reduce financial protections for clients and solicitors and are without merit,” Law Society deputy vice president Simon Davis said.
““Clients, employees and solicitors would bear significantly higher risk, but there is no evidence this would be counterbalanced by lower insurance premiums.
““Solicitors and their clients are protected by copper bottomed insurance, which is appropriate given the gravity of many of the issues we deal with for businesses and individuals.”
“The SRA proposes reducing minimum cover from the current level of £2-3 million, to between half a million and one million pounds. Access to the Solicitors Compensation Fund would also be restricted and maximum payments reduced from £2 million to £500,000.
“Simon Davis continued: “Insurance brokers say these proposals are unlikely to result in lower premiums, so it’s hard to see how clients could possibly benefit, but it’s easy to see how they might end up paying a very high price for the fall in insurance protection.
““Premiums already reflect levels of risk in the work a firm undertakes, and cost is front-loaded into the first £500,000 of cover, so the idea that the current system is unfairly ‘one size fits all’ is without any foundation.
““No other profession in the UK today offers their clients such comprehensive or robust protection. This backstop is key to public trust in solicitors and the legal sector, which in turn underpins the rule of law.””