The Legal Services Consumer Panel has hit back at criticism by the Solicitors Regulation Authority (SRA) that it opposes a minimum indemnity insurance limit of £500,000 for solicitors, while supporting it for accountants.
In a letter to the Legal Services Board (LSB), Elisabeth Davies, chair of the consumer panel, said the Institute of Chartered Accountants in England and Wales (ICAEW) operated in “very different” circumstances from the SRA.
“ICAEW’s arrangements apply to a small number of providers, are focused on a single activity (probate) and accountants have a low claims history,” Ms Davies said.
“By contrast, the SRA’s arrangements would apply to a large number of providers, who offer a wide range of services, and who have rather a different claims record.”
Ms Davies said that following the panel’s feedback on its draft licensing authority application, the ICAEW had inserted guidance to the effect that firms must inform clients in cases where the value of estates is likely to exceed the level of their indemnity cover.
“We are disappointed that the SRA has rejected our suggestion that the same principle should apply to solicitors,” she said.
“The SRA is right to say that consumers currently do not make choices based on levels of cover, or that they don’t check such cover, but this is the very reason why we consider solicitors should be required to inform clients when they are not protected.
“The SRA’s proposals as they stand would transfer risk to the consumer, but without helping the consumer to mitigate such risk.”
In its formal application to the LSB to reduce the indemnity limit for solicitors from £2m to £500,000, the SRA argued that it was proposing a new duty for solicitors to secure an “appropriate level” of indemnity insurance. It noted that this was not a duty that accountants were under.
However, in the letter Ms Davies repeated the consumer panel’s view that there was a risk that “irresponsible firms” would ignore the new duty. She stressed the strength of opposition to reducing the indemnity limit for solicitors.
“We consider it significant that the major representative bodies – covering consumers, lawyers, insurers and lenders – are opposed to the proposal, while the Legal Ombudsman has also come out against.
“We also find it hard to understand why the SRA has been unable to obtain current claims data from insurers, which would have given everyone more reliable data on which to make an informed judgement.”