The Solicitors Regulation Authority confirmed today that it will not be able to reduce the minimum terms of indemnity insurance cover in time for most firms to renew this year.
The regulator had hoped to have the new £500,000 mandatory cover in place by October after agreeing the controversial measure, designed to cut red tape, in July.
But the oversight regulator, the Legal Services Board, which has the power to pass the plans, has since opted to extend to 90 days the time it needs to make a final decision.
And a warning notice issued today by the LSB, which asks the SRA for more information on a part of the reform, comes with an automatic 12-month extension, taking the process beyond 1 October, by which time most firms will have chosen to renew.
Charles Plant (pictured), chair of the SRA board, said he was ‘disappointed’ the LSB had put the brakes on the regulator’s plans.
He added: ‘In principle, I think this is the wrong decision and we remain convinced of the case for changing the arrangements for professional indemnity insurance, in order to deliver benefits for solicitors and consumers alike.’
The SRA also confirmed that there will be no new outcome requiring firms to assess and have an ‘appropriate’ level of cover by October. The 2013 SRA Indemnity Insurance Rules and minimum terms and conditions will remain in force for the October 2014 renewal.
Current compulsory minimum cover is set at £2m, with incorporated practices required to have £3m cover.
The new cover limit was roundly criticised by representatives from the legal profession and the insurance industry, as well as consumer protection groups and mortgage lenders.
But the SRA insisted it would inject more flexibility into the market, reduce premiums and lift the burden on firms required to have more insurance cover than they need.
Law Society president Andrew Caplen welcomed the regulator's 'sensible decision'. He said: 'As we made clear the changes proposed had the potential to generate serious consequences for the market and allowing a longer period for debate and consideration of any change is needed.'
Caplen called for a debate about the balance between competition and consumer protection - especially in the light of the LSB's decision to allow licensed accountants to offer legal services without comparable PII obligations.