The Legal Services Board (LSB) has written to the Solicitors Regulation Authority (SRA) to explain that it has delayed making a decision over the SRA’s proposal to reduce the compulsory minimum level of professional indemnity insurance cover to £500,000 until August 2015.
In its letter to the SRA’s chief executive, Paul Philip, his counterpart at the LSB, Chris Kenny, expressed concern at the SRA’s suggestion, warning that it could be “prejudicial to the regulatory objective of protecting and promoting the interests of consumers”.
“The [SRA’s] consultation and application both present potential cost savings as a key driver for the change but there is only limited evidence that this will be achieved,” he wrote.
In addition, said Kenny, both the impact on the price of top-up cover and the time required for the market to adjust to a lower level, had not been explored in any detail.
In response, the SRA said that the decision was disappointing, given that any potential reductions would not now be able to take effect in time for this year’s renewal cut off date in October.
“In principle, I think this is the wrong decision and we remain convinced of the case for changing the arrangements for professional indemnity insurance, in order to deliver benefits for solicitors and consumers alike,” said Charles Plant, chair of the SRA board.
“We will, therefore, continue to develop our proposals on this issue.”
Ged Wood a PII manager at broker Wesleyan, said that the decision was welcome as it brought certainty to the market. He said that some firms had been holding back from renewing their PII cover to see what the outcome would be of the SRA’s proposals.
“The delay means there is going to be a surge of applications to brokers and insurers in the next few weeks,” he said.
“If at some point a reduction in the compulsory minimum level of cover to £500,000 is introduced it may be of interest to a small number of firms, but I expect the vast majority will prioritise effectively protecting their business over making minimal cost savings.”