Closed Consultation

Protecting the users of legal services: balancing cost and access to legal services

18 June 2018

  • Download the full consultation paper
  • The deadline for submission of responses was 15 June 2018.
  • The information that appears below is for reference purposes only.
  • Analysis of responses to the consultation is in progress.


Legal services matter to us all. They can help us at some of the most important and potentially vulnerable moments in our life - whether passing money onto loved ones, buying a house or handling a relationship breakdown. Most people are happy with the service they receive from solicitors and regulated law firms, but things can and do go wrong. It is crucial that the public can trust that when things go wrong the right protection is in place. The principle that all regulated law firms should have a minimum level of indemnity insurance, with an additional safety net of the Compensation Fund, has served the sector well.

Our analysis of 10 years of insurance claims against law firms suggests our current approach is too rigid. The legal sector is increasingly diverse, with solicitors and firms practising in many different ways. Our rules could mean some firms, particularly those working in low risks areas, are spending more on cover than is necessary. The evidence shows that this burden falls particularly heavily on small firms.

We also know that our insurance rules can put new firms off entering the market – a market that the Competition and Markets Authority (CMA) has concluded needs to be more open and competitive to better serve the public.

Our proposals aim to tackle these problems by taking a pragmatic approach that gives firms more flexibility to choose the right level of insurance cover to fit their business and its customers. There would be an opportunity for firms, particularly smaller ones working in low risk areas, to reduce their insurance costs. The public could still have confidence in a minimum yet appropriate level of protection, while potentially benefiting from lower costs and more choice.

A balance needs to be achieved. Many people struggle to afford legal services, with only one in ten making use of it when they experience a legal problem. When so many people are struggling to access solicitors' expertise, we need to be confident that the protection is set at the right level. The lower costs of insurance should, if the market is working well, ultimately flow though to lower prices for the users of legal services.

In the same spirit, we are also reviewing how, in a changing world, we are operating the Compensation Fund. We want to make sure it has a clear purpose as a hardship fund so that people who are vulnerable and deserve it the most continue to be protected. Nobody wants to see victims of dishonest solicitors out of pocket, losing the home that they were buying or seeing a family member's hard earned savings lost. But should the Compensation Fund be there to protect the wealthy, the handful of people who put their money into dubious investment schemes seeking a high return or other organisations who have more considerable resources?

We realise this consultation deals with complex areas with no easy answers. That is why in recent years we have carried out extensive engagement and research to make sure our proposals are based on the best evidence available. Making sure we arrive at the right level of the appropriate protection will be a fine balance, so we are keen to hear a wide range of views to make sure we get it right.

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  1. The total contribution for 2017 increased to £11.1m from £8.5m in 2016. The individual contribution was raised to £40 (compared to £32 in 2016) and the firm contribution became £778 (compared to £548 in 2016)
  2. We define this in paragraph 105 in the consultation paper
  3. If there is a successor practice to the ceased practice, then the requirement to provide run-off cover does not apply unless the firm elects to be insured under the run-off cover
  4. For licenced bodies the policy covers only their regulated activities
  5. The duty to remedy breaches rests not only on the person causing the breach, but also on all the principals in the firm and extends to replacing missing client money from the principals own resources, even if the money has been misappropriated by an employee or another principal
  6. The Compensation Fund has the option of seeking redress from the individual at fault, but this is often impractical due to the costs of legal action and the limited chances of a successful recovery
  7. For 2017/18 we have estimated that intervention costs will be in the region of £6.9m
  8. According to the Legal Services Consumer Panel Tracker Survey 2017, 31 percent of respondents had sought legal advice for conveyancing, 13 percent for probate and 7 percent for accident or injury claims.
  9. A "client account" is an account of a practice kept at a bank or building society for holding client money, in accordance with the requirements set out in the SRA Accounts Rules 2011
  10. These are unredeemed mortgage, conveyancing fraud, gross over-charging and other fraud
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