The Law Society Council finalised the new arrangements for indemnity insurance at its meeting last month.

The Master of the Rolls approved the rules a few days later.

The result is that the profession will this summer face the biggest change to its professional indemnity arrangements since mandatory insurance was introduced in the 1970s.For the first time, solicitors' firms will have the opportunity - and the responsibility - to make a choice about their insurer.

Most firms will receive a quotation through Solicitors Professional Indemnity Limited (SPIL), the joint venture established by the Law Society and St Paul International.

But in future, firms will have a choice.

They c an accept the terms offered by SPIL, or look for terms which suit them better from another approved insurer.It is not for the Law Society to tell firms how they should choose.

Some will want to achieve the lowest possible premium, and will be willing to pay large excesses on each individual claim.

Others will prefer to ensure that the excess on each claim is kept to a modest level, and will be willing to pay a higher premium in order to achieve that.

Some firms may give particular weight to the arrangements each insurer offers for claims handling.

There is no right or wrong answer.

Each firm will have its own priorities.Not every firm will receive a quotation from SPIL.

Some will have refused consent for their claims record to be passed from the Solicitors Indemnity Fund to the new joint venture.

Those firms will be free to seek a quotation from SPIL, but they will not receive one automatically because SPIL will not have the information necessary to generate a quotation.

Other firms may receive no quotation from SPIL because their claims record is such that SPIL does not wish to offer them cover.

That will apply to only a tiny minority of firms, but it will happen to some.If firms are not offered terms by SPIL, or do not find them acceptable, they must obtain cover from another qualifying insurer.

Not every insurance company will be a qualifying insurer in this sense.

Qualifying insurers must have signed an agreement with the Law Society under which they bind themselves to:-- provide cover on the Law Society's minimum terms;-- participate in the assigned risks pool; and-- pass information about suspected dishonesty to the Office for the Supervision of Solicitors.Lists of qualifying insurers will be published from time to time, and an up-to-date list will be included on the Law Society's Web site (www.indemnity.lawsociety.org.uk).A few firms - especially those with the worst claims records - might find that no qualifying insurer will offer them terms, or only at a wholly unaffordable price.

What happens then? It would be a disciplinary offence for principals to practise without having taken out qualifying insurance.

If firms cannot find a qualifying insurer who is willing to cover them, they must apply to the assigned risks pool.The assigned risks pool will provide cover, for a maximum of two years, to firms which cannot obtain cover on the commercial market.

But it will do so at a price.

First, premiums will be high - as high as 25% of the first £500,000 of a firm's gross fees, with tapering percentages for gross fees above that level.

Secondly, firms will not be permitted simply to carry on as before.

They will be subject to rigorous inspection to establish the reasons for their poor claims records, and to identify what needs to be done to put things right.

Firms will be required, as a condition of membership of the assigned risks pool, to implement any special measures which the Law Society decides are necessary to reduce the risk of claims arising in the future.

The cost of the inspections necessary to determine what needs to be done, and of subsequent follow-up visits, will also be charged to the firms concerned.A handful of firms might, by accident or design, fail to take out qualifying insurance and fail also to apply for membership of the assigned risks pool.

They will be taking a big risk in terms of disciplinary actions against the principals concerned.

They would also be short-sighted from the financial point of view.

Where firms have no qualifying insurance, and have not applied to join the assigned ris ks pool, any claims will still have to be met from the assigned risks pool, since the Law Society has to make sure that the public is protected.

However, the premiums charged to the firm concerned will be 20% higher than the premiums charged to firms which apply for membership of the pool in accordance with the rules.

New requirements for accountants' reports will mean that, in future, the Society will be told whether or not the accountants saw evidence of compliance with the requirement to hold qualifying insurance.It is to be hoped that disciplinary action will not be needed.

The Law Society is determined to do all it can to ensure that firms do not run into problems through ignorance of the arrangements.The Society will continue to try to get across the maximum possible information to firms about the scheme.

It will shortly be sending all firms a copy of the new rules together with an explanatory commentary.

That mailing will also include up-to-date information on the list of qualifying insurers.Next month, the Society will send a leaflet setting out some advice on the factors to bear in mind when choosing which insurer to use.

Each firm will make its own individual choice about how much each factor matters, but the Society's checklist will help ensure that important points are not overlooked.Information about the new arrangements will continue to be carried on the Law Society's Web site.

Practitioners may alternatively wish to contact the practice advice service on 0870 606 2522.