Bluefin voices concern over SRA proposals that put “consumers and legal advisors at risk”
Bluefin Professions has voiced concern about the impact to law firms and solicitors following changes proposed by the Solicitors Regulation Authority’s (SRA) to compulsory professional indemnity limits. The SRA has proposed the reduction of the mandatory minimum limit from £2,000,000 to just £500,000 in the belief that the changes will enhance consumer protection and reduce “unnecessary regulatory burdens and costs on small firms undertaking low-value transactions.”
However, Bluefin believes these changes could be damaging to the profession and that lowering the limit of cover will not provide better protection for consumers or reduce costs for small firms. In addition, the reduced limit could leave partners of small firms personally exposed to claims that exceed £500,000.
The SRA argues that if the cover is being reduced then it follows that there should be a reduction in the premium. Yet the vast majority of claims fall under the £500,000 threshold with insurers regarding the first £500,000 of cover for solicitors as the “working layer” which attracts the significant bulk of the premium. As a result, there will be little or no saving for firms, especially as the SRA has not accounted for claims inflation and the fact that claims costs are steadily increasing.
There are further practical implications of reducing the minimum limit of indemnity, particularly with regard to run-off cover and the abandoned Assigned Risks Pool (ARP). These issues need serious consideration to ensure law firms and consumers are properly protected and it is a matter of urgency that this is done before the renewal season starts.
Stuart Dugdill, Account Director at Bluefin Professions, commented: “PII is a mandatory purchase and the SRA has always argued that the primary reason is to protect the consumer Decreasing the minimum requirement to just £500,000 will achieve the opposite. There is a serious danger that reducing the financial scope of the cover will put both consumers and legal advisors at risk. The SRA has not consulted adequately on this matter, the process was rushed and there seem to be many issues that were not given proper consideration. It will be damaging to the legal profession if these proposed changes are passed.
“The SRA, in its quest to protect consumers, would do better to consider the introduction of a minimum security rating for insurers, relaxing the policy wording restrictions to bring the policy into line with other professions and bringing back a modified version of the ARP as a proper safety net. We would advise all solicitors to speak to their insurance advisors to consider the options that are available to ensure they are secure.”