We react to the reports that the Solicitors Regulation Authority (SRA) have put their reforms for the professional indemnity (PI) insurance market on the back-burner.
In March 2018, the SRA published a consultation “Protecting the users of legal services: balancing cost and access to legal services”, which outlines proposals for the Solicitors’ Compensation Fund and the PI insurance market, with the stated aims of:
- ensuring the needs of those who deserve protection are met and ensuring the longer term sustainability of the Compensation Fund;
- reducing the cost of PI insurance, particularly for firms working in low risk areas;
- reducing run-off costs; and
- removing barriers for new firms entering the market and improved access to legal services.
We are pleased that the SRA have postponed the proposed changes to the limit of indemnity as we did not think that the proposals would achieve their aims or benefit the profession. However, whilst it is very easy to be critical of the SRA, the consultation and the proposals within it were not wholly negative.
The SRA can not be criticised for consulting and on this occasion, unlike in the 2014 consultation, it does appear that they have taken account of the consultation responses, and at the very least not considering in the near future.
In our response to the SRA proposals back in July 2018, we were highly critical of the use of data and responded that “we have no confidence in the analysis of the claims data and the conclusions reached on the basis that there are inconsistencies between the analysis and the data”. Whilst we were critical of the analysis, at least the SRA managed to collect market wide data (which no-one had managed to do previously). This data highlights the frequency, type and cost of claims, which at the very least should raise risk awareness and provides everyone with valuable market information from participating insurers, showing the state of the professional indemnity insurance market and the claims that affect it.
Finally, the SRA proposed separating the participating insurer agreement from minimum terms and conditions. Our view is that most solicitors’ policy wordings are not user friendly and in many cases unclear as they blend the two separate (albeit interlinked) agreements. Naturally we would be highly supportive of anything which made for a clear and more user friendly product for our clients.
We were highly supportive of this suggestion as we are of the opinion that this will lead to clearer and more user friendly policy wordings.
In summary, we are pleased that the SRA have postponed the proposed changes to the limit of indemnity, but the proposal put together was not wholly negative. It will be interesting to see if, with the predicted change in market conditions, whether the SRA will keep their proposed reforms on the back-burner for long.