Regulators will try again in 2017 with proposals to reform minimum terms for solicitors’ professional indemnity insurance.
The Solicitors Regulation Authority today published new figures as part of renewed efforts to secure a more liberalised market.
The offensive comes two years after the regulator was thwarted it its ambitions to reduce minimum cover from £2m to £500,000, after the Legal Services Board rejected the plans.
Ahead of a consultation expected next year, the SRA today published new research showing cover that appears to be out of proportion with the associated risks, in particular for smaller firms. The data covers the 10 years from 2004 to 2014.
The SRA said a high proportion of claims came from a narrow set of activities, in particular conveyancing. Taking away claims where the insurer did not state the reason for the claim, more than half of all indemnity payments stem from conveyancing problems.
Around one in five claims to insurers results in an indemnity payment and – in a potential nod to the proposed minimum cover plan – 98% were identified as having settled for less than £580,000.
Sole practitioners have the highest premiums as a percentage of turnover, amounting to around 7% of their income.
Crispin Passmore (pictured), SRA executive director for policy, said the data provides the ‘basis for discussion’ which will underpin next year’s consultation.
‘Indemnity insurance is one of the measures that helps clients of regulated law firms if things go wrong. It also plays a key role in protecting law firms from claims.
‘But as we have said before, we have a very diverse profession with solicitors and firms practising in many different ways. Regulation needs to respond to and support that variety. ’
Passmore said the SRA wants to create a more flexible way for firms to provide adequate and appropriate cover without spending more on premiums than is really necessary. That, he suggested, could mean lower costs for firms - and therefore lower costs for users of legal services.
But he was challenged at a conference yesterday by audience members who said data was not taken from insurers that had collapsed, and that a reduced minimum would offer less protection for consumers.
The Law Society said reviewing the PII regime on a regular basis was important but that any proposed changes need to ensure the right balance between protecting consumers and solicitors, and promoting a competitive insurance market which enables affordable PII costs for firms.
Chancery Lane added: ’PII is a complex market and gathering comprehensive data on claims is difficult. We appreciate the SRA’s efforts to gather data on PII claims patterns to help inform thinking on the PII regime. We look forward to investigating the data in more detail.’