Society turns to LSB after board clears cover reform
PUBLISHED July 9, 2014
The Law Society is to take its campaign against reforms of professional indemnity insurance to the Legal Services Board.
In a move that united the Law Society and Legal Services Consumer Panel (LSCP) in opposition, the Solicitors Regulation Authority last week voted to reduce the minimum mandatory cover from £2m to £500,000.
The SRA expects the change to come into force by this year's autumn renewal season. However, it still requires the agreement of the super- regulator - and the Society has indicated it may write to the LSB setting out its concerns.
The SRA board voted overwhelmingly in favour of the plan with just one board member against, former Law Society president Paul Marsh.
Board member Sara Nathan told her colleagues the reduction in minimum terms was 'proportionate and targeted, moving away from defined rules to solicitors taking their own responsibility.'
The meeting also heard there was some evidence that reducing minimum terms could cut insurance premiums.
But Elisabeth Davies, chair of the LSCP, described the decision as 'disappointing'.
'There were gaps and weaknesses in the evidence and we are not convinced this course of action will lower prices for consumers,' she said. 'In fact it might mean consumers will lose the current level of protection without gaining anything in return.'
The SRA says changing PII terms and conditions is an important part of its reform agenda to ease the regulatory burden on solicitors.
In a related move, the board also voted to restrict the compensation fund to claimants whose income or value was less than £2m, and to allow up to £500 to be withdrawn from firms' residual client balances to donate to charity.
However the SRA opted not to go ahead immediately with removing the requirements for an annual accountant's report for all firms. Board members said they wanted more safeguards to ensure client money remains secure.