Insurance proposals strike a Goldilocks balance between market freedom and consumer protection.
As our faithful below-the-line commenters are only too happy to point out, the Solicitors Regulation Authority gets plenty of things wrong. So when the regulator does something right, it would be churlish not to doff one’s cap and acknowledge so.
The consultation on reducing the minimum indemnity insurance requirements is probably the most impressive work it has produced in my three years covering legal services regulation.
The paper proposes to cut the level of compulsory cover from £2m to £500,000 and halve the six-year run-off cover requirement. These changes will apply to the smallest – and therefore most vulnerable firms.
The proposals inject flexibility, competition and choice into the system. Firms can rely on their excellent claims record to take advantage of minimum requirements – others may seek out greater protection and market themselves on that basis.
Larger firms will welcome the bureaucratic constraints being lifted somewhat, while smaller firms will appreciate the chance to break free of disproportionate shackles.
Of course, with freedom comes the potential for client protection to suffer. There is a very fine balancing act between releasing firms from expensive and unwieldy terms and conditions, and leaving consumers exposed.
But what the SRA is proposing is far from a free-for-all: mandatory cover still exists.
The SRA’s previous suggestion to outlaw unrated insurers from the solicitors market felt prescriptive and rushed – it was policy seemingly on the hoof.
This week’s proposals are genuinely inventive and show, at long last, an appreciation for the predicament of small firms.
The regulator has always maintained its sole commitment is to protect consumers, but there has never been enough awareness that consumers’ interests are best looked after by ensuring their law firm avoids collapse.
A high level of compulsory cover was an unnecessary burden on practices. This easing of the restrictions should help to bring some sense to the system.
John Hyde is a Gazette reporter