The uppermost issue for many law firms at present is whether they will manage to get professional indemnity insurance (PII) for the coming year, and how much it will cost.

We are often asked how many firms we expect will fail to get PII on the open market and by how much premiums will increase. All we know is that this year’s renewal is likely to be the most difficult for a long time. Following the decision of the profession to go to the market in 2000, we enjoyed a period of benign conditions – but that period has ended.

It is in everybody’s interests that firms that are viable and well-run should secure PII. May I therefore offer advice to those that have not yet found cover for 2010/11.

First, if you have not commenced the process of finding PII, you must start now. Many insurers place limits on their exposure to particular markets. If you leave it to the last moment, you are liable to be told by some insurers that they are no longer interested in your sector. The number of insurers willing to provide cover for the smaller end of the profession appears to be very limited this year.

Second, use a broker. This could save you a huge amount of time and secure a more affordable result. The Solicitors Regulation Authority does not vet or approve brokers, nor does the Law Society, but there is an up-to-date list of brokers on the Society’s website, including contact details and in many cases indications of the types of firm the broker caters for. It has also set up a helpline – 020 7320 9545 or PII@lawsociety.org.uk.

And third, take great care when completing forms. Inadequately completed forms are bound to make insurers wonder if a firm is telling the whole truth. If they are in doubt, they are likely simply to reject the application. Making time to complete the proposal form thoroughly is time well spent.

The aspect of PII that has caused the greatest concern to the SRA board during the past year has been the assigned risks pool (ARP), the safety net for firms that have failed to obtain PII on the open market. The cost of the ARP is met by the insurers which write PII for solicitors’ firms, and is inevitably passed on to those who have obtained cover. It has risen dramatically, partly because the number of firms in the ARP has quadrupled, and partly because a disturbingly high number of firms have not paid their ARP premiums.

In May, the SRA board tightened access to the ARP from 1 October 2010, principally by preventing newly formed firms from entering it, and reducing the maximum period a firm could be covered from two years to one. On top of that, we have adopted a tough enforcement strategy to ensure that firms stay in the ARP for as short a period as possible and that the position of firms that pose a high risk or fail to pay their premiums is regularised, or they are closed down.

During the past few weeks the SRA has contacted firms nearing the end of their two-year term in the ARP to ensure that they will either obtain PII in the market or close in an orderly manner. Firms that have failed to pay their ARP premiums are required to pay or face regulatory and/or legal action and/or be declared ineligible to stay in the pool. Our aim is to ensure that, by October, firms that are high-risk and have failed to pay their premiums will be managed out of the ARP. Firms entering the ARP this October will face the same policy.

This robust stance reflects the firm view of the SRA board that it is wrong that firms which are financially unstable or which pose a significant risk to consumers of legal services should be propped up. These firms are a burden upon the rest of the profession, who indirectly pay for the ARP.

In the immediate term, enforcement of these measures will mean much more work for the SRA, and consequential additional cost. It is quite possible that a significant number of firms will close. It would be surprising if additional interventions were not necessary. However, in the longer term I am confident that the steps we are taking will help sustain a healthy and affordable market for solicitors’ PII.

On a strategic level, work has begun on our ‘root and branch’ review of client financial protection, with a view to introducing new arrangements in time for the renewal on 1 October 2011. This review will cover both PII and the compensation fund. Consultants working on our behalf have started to interview a wide range of solicitors and a formal consultation will be held towards the end of the year.

Finally, a word about our preparations for outcomes-focused regulation, which we also aim to introduce in October 2011. Our nationwide roadshows demonstrated that many solicitors are eager to embrace this principle, recognising that it enables them to design processes that are appropriate for their firms and the clients they serve, rather than to become embroiled in compliance with numerous detailed rules, some of them of questionable significance. The comments and suggestions we have been receiving will be of enormous value for the next step, the second consultation on the new Handbook, in October. We look forward to hearing from individual solicitors, local law societies, the Law Society, consumer groups and all those with an interest in legal services.

Charles Plant is chair of the board of the Solicitors Regulation Authority