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See the LSB Thematic Review goo.gl/rrg9jn and the (underwhelming, in my view) report of the Regulatory Policy Institute goo.gl/D895py. It is all about shaving cost off PII and limiting regulatory intervention to where it is necessary (also a trigger point for the proposal to allow solicitors in non-SRA regulated entities to provide services to the public).

The SRA and LSB do not perceive their role under the LSA 2007 as being to protect anyone other than consumers. That begs the question as to whether they are under a wider duty under s37 of the Solicitors Act 1974 to have regard to the interests of the profession and solicitors' staff as well. (See Swain v Law Society.)

An unintended consequence of reducing the amount and scope of cover might be that it may no longer be safe to rely on undertakings proffered by smaller firms, as you will never be sure what cover they have, nor have the current degree of assurance that their insurers will have to pay out.