News release

Insurance change would increase flexibility for firms

We have proposed a change to our Participating Insurers Agreement (PIA) to make it is easier for firms to switch their regulator and improve competition in the market.

We can waive a firm's obligation to obtain six-years' run-off cover for its professional indemnity insurance if that firm is moving to another legal service regulator. However, the PIA still requires run-off cover to be in place. This can be a barrier to switching as firms would need to have dual cover in place.

We have been approached by the Society for Licensed Conveyancers to review the situation and remove the need for cover, when switching regulators, from the agreement. A consultation on the proposal is therefore taking place.

Crispin Passmore, Executive Director for Policy, said: "Firms should be able to switch to the regulator they feel is right for their business more easily than is currently the case. Legal businesses are increasingly owned by, and employ, a range of lawyers and non-lawyers, so choosing a regulator is an important business decision. Facilitating choice is a good way to encourage a modern, competitive market that provides affordable and accessible services.

"The Legal Services Board ensures minimum standards of client protection are maintained by all legal services regulators. Nonetheless, we have to be careful that removing unnecessary bureaucratic obstacles for firms does not create potential risks for the clients of firms wanting to switch. We want to get the right balance between encouraging a competitive market and ensuring the interests of those using legal services continue to be protected, so we are keen to hear views on how best to do this.

"If there are options that we have not thought of that should be considered, we are very open to ideas.”

Waivers can only be given if firms are switching regulator, rather than ceasing to practise entirely. Other regulators have their own indemnity insurance requirements. If changes to the agreement were made, firms would still need to negotiate with their insurer to change the conditions of their policy.

This consultation is not tied in with the more substantive consultation on PII that is planned for later this year. The consultation held recently on changing the minimum terms and conditions for PII in line with the Insurance Act is scheduled to go back to the Board in June.

The consultation, which runs until 14 July is available here:

Go to the consultation

 
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