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If 98% of the claims made against insurers are below £500,000 , there is absolutely no necessity to change the minimum indemnity cover limit from £3 Million. Although the SRA state that the change would affect a minimum number of victims of misconduct, the SRA is further eroding protection for consumers and is instead pandering to the needs of insurers (who the SRA has no obligation to protect or guard against financial loss). What the SRA are failing to recognize here, are the effects of insurers aggregating claims. Let's say for instance that the insurers on the Ecohouse case had not declined cover owing to the two partner's dishonesty and support of a dubious investment scheme (fraud). A total of £33 Million went through the solicitors escrow account, yet their indemnity cover limit was only £3 Million. If the insurer had been permitted to aggregate claims, then those affected by the fraud would only stand to receive back 1/11 th of the sum they had invested, due to aggregation of separate claims into one.

The SRA's viewpoint is very narrow minded here, and serves the insurance industry well, but is a betrayal of consumer protection. If the existing limit of £3 Million minimum indemnity cover is presently failing to reimburse losses owing to aggregation, then clearly a £500,000 limit would be an unmitigated disaster for victims of solicitor misconduct who suffer loss through misappropriation of their funds. The effect of a £500,000 limit on compensation offered by an insurer after aggregating claims would be that the victims of a fraud like Ecohouse would stand to receive only 1/66 th of their losses. The figure of 1/11 th is totally unacceptable as things stand.

There is considerable confusion regarding insurers being able to aggregate claims. This is demonstrated by the protracted contest in relation to the AIG vs Ors case which has dragged on for several years now, causing intolerable uncertainty for those who have suffered loss - this is all down to inept MTC policy terms. The definitions and situations under which claims can be aggregated need to be clarified and defined more succinctly, because they are so ambiguous that not even the High Court Judges can agree on them.

The SRA cannot permit aggregation clauses in the MTC's to persist at the same time as reducing indemnity limits. It is also abundantly clear that a limit of £500,000 would not cover the losses incurred owing to misappropriation of client funds in conveyancing and commercial conveyancing situations. The proposal is completely preposterous and would not be fit for purpose.

The SRA would likely find that any perceived saving and improved prospects of survival by insurers would not result in reduced solicitor insurance premiums ; the insurers would simply pay their shareholders larger dividends. One would hope that SRA executives and board members are prohibited from being shareholders or acting on the board of insurance firms due to the obvious conflict of interests that would cause, though it would at least go some way to explaining why the CEO and the board pander so much to reducing insurer's exposure to claims in preference to protecting consumers.