One of the country’s biggest mortgage lenders has issued a warning to solicitor firms attracted by the proposed new mandatory minimum for professional indemnity insurance.
Nationwide strongly indicated to the Gazette that it will continue to require the current £2m minimum cover for the 4,300 firms on its panel.
The Solicitors Regulation Authority has applied to the Legal Services Board for the reform of indemnity insurance rules, having controversially decided earlier this month to propose a reduction in the mandatory cover to £500,000.
Lenders are known to have serious reservations about appointing firms that offer significantly less cover for homebuyers.
A spokesman for Nationwide said the building society did not support the change because it reduces the level of regulatory protection provided to customers.
‘We hope the Legal Services Board will reject these proposals,’ he said. ‘Nationwide is still considering our response, however we would caution conveyancing firms against seeking reduced levels of PII cover for conveyancing activities for their forthcoming renewal.’
The SRA’s application to the oversight regulator estimated that more than 99.99% of conveyancing claims would fall within the £500,000 limit, with just 50 consumers making a claim above that figure in the course of a year.
Those handling bigger transactions would have to decide whether to take out more cover on top of the minimum.
‘The focus of these changes is to place responsibility on the firm to have appropriate cover, rather than to pass the risk of not having it on to the consumer,’ the regulator said.
The LSB confirmed the application was processed on 15 July, with 28 days allocated for an initial decision.
The SRA is still expecting firms to be able to take out the new minimum cover in this year’s renewal period, with the vast majority of firms working to a renewal date of 1 October.