The Law Society has urged firms not to wait to secure indemnity insurance this year despite uncertainty being lifted about minimum cover requirements.
The Solicitors Regulation Authority confirmed this week it will not seek to reduce the compulsory minimum cover to £500,000 in time for this year’s renewal period – a decision widely welcomed across the legal and insurance sectors.
While the regulator had wanted to implement the change as soon as possible, it must wait for approval from oversight regulator the Legal Services Board.
But despite this issue being put to one side, Society president Andrew Caplen said that this is not a sign that firms can be complacent about securing re-insurance.
Around 95% of firms are expected to be working to the 1 October deadline, with brokers expecting to handle renewals until the last minute.
Caplen said the market indications suggest that capacity should be less of a problem this year, but he warned any firm that has not begun preparation will face ‘potentially serious consequences’.
‘We have had no catastrophic unrated insurer failure this year and there has been some limited new insurer entry into the smaller firm sectors and the larger sectors. Nevertheless firms should not delay renewing their PII or else they risk entering the extended indemnity period, incurring higher premiums or even having to close their practices.’
Caplen said the Law Society will work with the SRA on future insurance policies, which they believe will produce more targeted regulation.
He stressed the need for a debate about the balance between competition and consumer protection, especially in light of the LSB’s decision to allow accountants to operate without comparable insurance obligations.
Ged Wood, PII manager at broker Wesleyan, agreed that the SRA’s postponement will bring certainty to the PII market this year, particularly as some firms had held off renewing until a decision had been made.
‘The delay means there is going to be a surge of applications to brokers and insurers in the next few weeks,’ he added.
‘Finding the right level of PII protection at the right price from a reputable provider can be a time-consuming process so our advice is always to start early and work with a good broker who can help you navigate your way through the range of insurers.’