Consumers open to optional top-up cover to reduce cost of PII

Hill: Increasing costs of PII threaten the viability of system

Consumers are open to the idea of mandatory professional indemnity insurance (PII) cover being lower and therefore cheaper, with the option to top it up, research has suggested.

The Legal Services Board commissioned the study as part of a project reviewing financial protection arrangements in a bid to balance consumer protection with the cost to the profession.

Community Research ran a two-week online deliberative forum with 33 consumers and conducted a survey of 1,029 people from England and Wales.

It found that most people assumed the protection provided by PII was simply part-and-parcel of the system. Once informed about what was in place, consumers “welcome the knowledge that PII exists”, the research said.

Amongst both samples, the most frequently preferred options for the future were those featuring automatic PII cover for all clients, with 42% of survey respondents happy with the status quo.

But amid concerns that the cost of PII could put up the price of legal services to a point beyond the reach of many people, there was “considerable support” for ongoing mandatory protection being at a lower level and cost, with consumers given the choice of whether to add to this – albeit on an opt-out basis, with the extra cover included by default.

Asked about balancing the trade-off between preventing the costs of legal services from rising too much and ensuring everyone was protected, a sizeable majority chose somewhere in the middle.

“However, more tended towards ensuring everyone gets the same cover if things go wrong, as opposed to preventing legal services costs from rising,” the research said.

The least popular option in both phases of the research was giving consumer complete freedom of choice. A majority wanted lawyers, mandated by their regulators, to remain responsible for PII.

Across the board, many respondents emphasised the need for consumers to receive clear explanations and information about the cover and the pros and cons of having it.

“Most participants took the view that they and other consumers might struggle to make the right choices and this would lead to an unacceptable degree of risk, particularly for the most vulnerable in society,” the research said.

“Many admitted that when buying insurance cover, they lack confidence in knowing the optimal level to purchase. The unfamiliarity and stress of the situation when faced with the possibility of choosing PII cover for a legal service, was seen as likely to exacerbate these issues.”

LSB chief executive Matthew Hill said: “Ensuring consumers are protected when things go wrong is vital to building and maintaining trust in legal services. However, the increasing costs of PII threaten the viability of the current system of financial protections.

“If this trend continues, it could increase costs for consumers and reduce the number of lawyers operating in the market.

“We have also heard concerns about a more cautious approach by insurers towards innovative activities. A cost-effective system is essential to promoting access to justice and ensuring the sector can innovate.”

The LSB is also inviting stakeholders to share their views on the purpose and scope of the financial protection project.

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