Why we don’t support the proposed PII reforms


By Martin Ellis, senior partner and head of UK professions, and Colin Taylor, partner, in the professional indemnity team at Legal Futures Associate JLT Specialty

Ellis: Insignificant reduction

The market debate continues to rage regarding proposed reforms to professional indemnity insurance (PII) for solicitors in England and Wales. The latest chapter in a long, winding journey came to an end last month, as the window closed for responses to the Solicitors Regulation Authority (SRA) consultation on these reforms.

In our response, we have outlined our considered views on the proposals and their potential implications. Clearly, it is a complex issue and a difficult circle to square. However, we believe that these proposed changes are unnecessary at this time.

Our reticence to support these reforms, as currently proposed, stems from – at least in part – a number of issues we believe have been overlooked.

We are, of course, not opposed to change that is for the benefit of firms in the marketplace, the profession as a whole and, inevitably, consumers of legal services. However, removing any of the protections that have been available for PII without fully considering the implications or challenging some of the assumptions being made would be a neglect of our duty to the profession.

It is our view that the proposed changes to the PII minimum terms will not provide an appropriate level of cover for SRA-regulated law firms. We consider that the proposed reduction in the minimum limit to £500,000 (£1m for conveyancing work) presents additional risk to the users of legal services and may in fact increase the complexity of the renewal process and potentially increase the cost to the vast majority of law firms.

In its consultations, the SRA also assumes that reductions in premiums will lead to lower costs of legal services, making them more affordable for disadvantaged members of society. The SRA state that the average rate on fees that firms pay for their PII is 5%, thus if premiums are reduced by 10% then the saving is 50p in every £100 of fee income.

Even if this is passed on in full to consumers, it will hardly make any difference to the affordability of legal services. Is this insignificant reduction worth the additional risks to both the industry and consumers? We’re not convinced.

You can read our full response to the consultation online.

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