Out of the frying pan, into the pool

Posted by Neil Rose, Editor, Legal Futures

Open for business: SRA will vet new firms first

A key feature of outcomes-focused regulation (OFR) is that new firms will need authorisation from the Solicitors Regulation Authority (SRA) before hanging out their shingle. This will include checking the firm’s business plan – such as the business model, proposed legal services and financial projections for no fewer than five years – as well as their compliance plan.

Meanwhile, the SRA has found itself in a slightly sticky situation over its decision to close the assigned risks pool to new firms, with the SRA’s own equality impact assessment indicating that this will disproportionately affect black and minority ethnic (BME) firms (see story). The Black Solicitors Network has argued vehemently that it should not have closed the pool to new firms before understanding why this is.

However, putting the BME issue to one side for a moment, few people have argued with the broad principle that if a new firm is so unappealing from day one that it cannot find insurance, then it should not be the job of the assigned risks pool – the cost of which is effectively borne by the profession through its insurers – to let them open for business anyway.

Connecting these two issues, the thought occurs that if, in a post-OFR world, all new firms have been given a clean bill of health by their regulator, there is a case for reopening the pool to them because there might be other, less good reasons that they have not been able to obtain insurance, particularly if they are BME firms. I put this thought to SRA chairman Charles Plant and chief executive Antony Townsend at Tuesday’s OFR press briefing, and although I rather got the impression that such an idea had not been put to them before, both considered reversing the decision on the pool highly unlikely. But could this not be a way out of their sticky situation?


    Readers Comments

  • Whilst logically I think that you are correct, I suspect that the insurance market is always going to be able to take a more robust, risk-based, approach to who is “worthy” of insurance than the SRA, who will need constantly to be aware of issues such as equality. I do wonder how they plan to deal with the pressures which they are likely to face from the equality lobby in relation to approval (or not as the case may be) of many smaller practices, many of whom may well be BME firms.

  • Catherine Rattray says:

    I am a solicitor trying to open a practice I got a quote of £23,000 for indemnity insurance, two years ago the amount was £2000. If ever there was a reason for entering the ARP this is it. Apparently I should be grateful I’ve been offered insurance. I can claim to be in all the minorities available to me, a woman, asian, I live in a rural community the list is endless. Isn’t time the SRA got ‘commercial’ about what is going on out there, I’m lucky I don’t have to set up now, I could wait for the market to sort itself out. What about the poor people this year who anxiously await their renewal premium, the ARP problem is about to get bigger. Excluding new practices is not going to stem the tide, it is just going to tighten the market. If insurers and the ARP won’t take on new practices, what is the solution going to be? I am seriously questioning the longevity of the profession, at the age of 37 it seems my time is up as a solicitor, I cannot go any further as there are no long term prospects for my career, I am certainly not going to stick around and flog a dead horse. To think I was ready to embrace the new ABS’s and MDP’s, the recent reporting that deregulation may go on hold yet again further puts me off continuing. My only hope is that the powers that be make me insurable at a reasonable rate and that some day MDPs will become a reality. As for the ARP, I wonder what it’s effectiveness really is, excluding practices whatever shape or form means that some of the public will not be insured somewhere along the line.

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