Revised proposals from the Solicitors Regulation Authority to reduce minimum indemnity insurance cover could damage firms and destroy confidence in the legal profession, the Law Society has warned.
The regulator floated the idea of reducing the £2m minimum cover level in a discussion paper in July – despite failing with an attempt to cut it to £500,000 last year. It says a lower limit will reduce premiums and increase flexibility, and has even mooted the idea of scrapping a minimum level altogether.
But in a 24-page response, the Society said today that the regulator’s paper fails to address why last year’s proposals had foundered.
‘The SRA is pushing inadequately scoped proposals containing significant risks and uncertainty for the profession, its clients and the public interest,’ it said.
Chancery Lane added that the SRA’s ‘flawed’ ideas show it ‘still does not fully understand how solicitors’ PII works’.
Since oversight regulator the Legal Services Board rejected the SRA’s initial plans last year, the Society said the regulator had produced no evidence that the PII market is ‘broken’ or that the public can no longer place absolute trust in the solicitors’ profession.
The response goes on to stress that current protections are generally working well and that consumers should not be expected to take on risks they are not able to understand.
The SRA’s paper, it suggested, overly concentrates on the cost of PII premiums and of the compensation fund, with the protection of the public ‘largely disregarded’.
The Society added: ‘Regulatory changes which are ill-thought-out will destroy belief and confidence in the profession, and would be deeply damaging for the reputation of the profession, to its clients and to the public interest.’
The Society is also critical of the timing of the latest call for evidence, coming when solicitors and insurers are occupied with PII renewal.