Proposed changes to solicitors’ professional indemnity insurance cover could over-complicate the system and leave gaps in coverage, the Association of British Insurers (ABI) has said.
The Solicitors Regulation Authority’s (SRA) consultation on insurance cover and legal services, which closed on 15 June, sought feedback on a range of proposals, including cuts to minimum cover levels and more flexibility in coverage.
In its response to the consultation, the ABI said that the SRA has provided insufficient evidence that its proposed changes would achieve their aims of reducing premiums for solicitors or reducing the cost of legal services for consumers, given the professional indemnity market is already very competitive.
Instead, the proposed changes could over-complicate the system and leave gaps in insurance coverage, according to the ABI.
Allowing greater flexibility around cover for defence costs could work, the ABI added, with a cap, or an excess, potentially leading to genuine claims being settled more quickly and reducing pressure on premiums.
Joe Ahern, general insurance policy adviser at the ABI, added: “It’s important both solicitors and their customers can be confident they have the right legal and financial protections in place. The minimum standards for professional indemnity insurance set out by the SRA at the moment are working well as part of a competitive market. We are urging the SRA not to over-complicate the system and expose some customers to unnecessary risk by reducing these mandatory limits.”
The Law Society was critical of the proposals in its submission to the consultation, declining “to accept that these changes are likely to boost competition or improve access to justice”.
The society argued: “The principles of the public interest and rule of law demand professional standards and trust in the profession of solicitors. These in turn demand that protections should be in place to guard against negligent failures by regulated persons. Having clear and uniform protections provides people with reassurance.”
“Fundamentally, insurance protection is an important part of regulation as it is a post-purchase safeguard rather than pre-purchase, providing indemnity that clients can rely on when other regulatory safeguards have failed. Insurance should not be used, therefore, as a mechanism to promote any market or inhibit any aspect of practice.”