News release

SRA sets out case for PII proposals

The Solicitors Regulation Authority (SRA) has reinforced its case for changes in its requirements for professional indemnity insurance in a letter to the LSB dated Friday, 5 September. 

The SRA's Board decided in July to introduce a new Outcome requiring firms to assess and provide an appropriate level of cover for their business and to reduce the minimum level of compulsory cover from £2 million (£3m for incorporated practices) to £500,000. This was part of the Authority's regulatory reform programme designed to reduce ensure that its regulation is targeted and proportionate and so reduce the cost and burden of regulation while still protecting consumers.

The Legal Services Board (LSB), which must approve the changes, issued a notice of 19 August warning that it might refuse the application and requesting further information from the SRA to support the application. As a result of the LSB’s notice and the additional time that it added to the approval process, the SRA announced that the proposed changes would not be in place before the common renewal date of 1 October, but also indicated that it intended to continue with the application with the aim of introducing the changes as soon as possible thereafter.

Paul Philip, SRA Chief Executive, said: "The current level of cover is an arbitrary, generic level set several years ago with an un-evidenced distinction between partnership and limited liability law firms. It has been overtaken by developments in the current legal market and there is no convincing evidence that it is appropriate.

"We believe our proposals strike the balance between securing proportionate financial protection at a price which does not negatively impact on access and value. We also believe our proposals are in line with the LSB's analysis of the regulatory objectives.

"The primary objective in changing our arrangements is to move from an arbitrary level of protection, which in many cases is unnecessarily burdensome, to one which is both targeted and proportionate. It is clear that no single level of cover can be appropriate for all transactions in a market as diverse as the one we regulate.

"Many small firms offer services such as consumer or immigration advice where the potential loss recoverable by damages is far below even £500,000. Forcing them to obtain compulsory cover for £2m or £3m is to impose a significant and disproportionate barrier to them and to the consumers who need such advice."

The SRA's submission to the LSB can be found here:

Go to the submission to the LSB

Further information on the SRA's Regulatory Reform programme can be found here:

Go to the Regulatory Reform page

The LSB's notices can be found here:

7 August: SRA statement: LSB extends assessment period

19 August: SRA statement: LSB notice

 
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