The Council for Licensed Conveyancers (CLC) is planning to introduce solicitor-style indemnity insurance arrangements, in a bid to make it easier for law firms to switch regulator.
Embracing an open market scheme instead of a master policy would help “make a reality” of the “theoretical” freedom of law firms to change, said CLC chief executive Sheila Kumar.
The CLC said it had been possible for a number of years for firms to choose to be insured outside the master policy scheme, but the CLC wanted to move to “a completely open market”, with minimum terms and conditions set out in a participating insurers’ agreement.
“This would simplify the insurance process for entities regulated by the CLC as they would only need to select a participating insurer rather than go through a process to opt-out of the master policy.”
Run-off cover would be included in the minimum terms and conditions, rather than the CLC requiring its members to purchase the cover separately.
“Under this new arrangement, insurers will be obliged to provide six years of run-off cover for a firm which closes. This run-off cover will be provided to firms at no additional cost at the time of closure.”
The CLC said in the consultation paper that many firms had not been able to afford the cost of switching from the Solicitors Regulation Authority (SRA) to the CLC, because of the SRA’s requirement that they must buy six years’ run-off cover at the time of leaving.
The CLC said it understood that the cost amounted “in many instances” to between two and a half and three times the firm’s last annual premium and acted as a “significant barrier” to leaving the SRA.
However, the SRA is consulting on a change to its rules, which would remove the run-off requirement where a firm switches to another approved regulator – a move welcomed by the CLC.
“Arguably, there may be an immediate advantage to practices which transfer to CLC regulation, in that the cost of PII cover may be less than equivalent PII cover obtained under SRA regulation,” it said.
Ms Kumar said the new indemnity arrangements would be “more streamlined and so easier to manage”, while improving protection for consumers.
She said the run-off changes would reduce the exposure of the CLC’s Compensation Fund to claims, as cover would be in place for all closed firms.
The CLC aims to implement the changes next month, following a consultation of only two weeks, and in time for the licensed conveyancers’ new indemnity year.