It strikes me as odd that the Association of British Insurers (ABI) isn’t happy with the Solicitors Regulation Authority’s professional indemnity insurance (PII) reform proposals. If implemented, insurance companies will be getting many of the concessions they’ve been after for years.

The ABI says that the proposals ‘risk prolonging market problems’, and takes issue with the fact that the SRA is bringing about change over two years rather than one. Is this just nitpicking?

The first wave of SRA reforms, proposed for the next renewal season, will bring about the end of the single renewal date; cut the time firms can spend in the assigned risks pool (ARP) from 12 to six months; and exclude financial institutions from the minimum terms of insurers’ policies.

Overall, this looks like a win for insurers: greater flexibility and no last-minute rush when it comes to renewals; a lighter burden in terms of underwriting risky ARP firms; and the removal from scope of millions of pounds worth of financial institution claims.

In its second wave of reforms, for October 2012 at the earliest, the SRA proposes to broaden the financial institutions exclusion to include all corporate (non-individual) entities; effectively do away with the ARP or alternatively restrict the work that ARP firms can do; and fund the ARP through a levy on the profession. The regulator will also consider whether insurers should be able to strike out policies for non-payment of premiums, fraud or misrepresentation.

Again, this all seems like an insurance industry win: swaths of potential claims would no longer be covered by minimum policy terms; there would be no more scary ARP to underwrite; if there was to be an ARP, the cost of running it would be borne by the profession; and the profession (via the compensation fund), rather than insurers, would pay out on claims where solicitors have done insurers wrong.

Nevertheless, despite a plethora of concessions, the ABI maintains that it is ‘crucial’ that the funding of the ARP is addressed, and insurers should be able to void policies in the instances outlined above, before 2012.

Now, these reforms are not aimed at making solicitors’ lives easier (in fact, they will adversely impact on conveyancing firms). They are aimed at modifying the market by removing rules, thereby allowing insurers to provide tailor-made cover (in other words, creating a freer, if not free, PII market). These are major changes for a profession totalling more than 120,000 members, that less than a decade ago entered the open market from the Solicitors Indemnity Fund. Perhaps this is why the SRA has opted for a two-stage approach to reform.

I would go as far to suggest that the ABI and its members are privately happy with the reform proposals. But I would expect the SRA to be pushed hard by insurers to quickly abolish the ARP completely, or at least shift the burden elsewhere. It is, according to nearly every public statement on PII made by the ABI and its members, the biggest thorn in their side.