The Legal Services Board has been praised for extending the time limit for its decision on whether to approve plans to cut the minimum indemnity limit for law firms, which meant the Solicitors Regulation Authority was unable to implement it this year.
Clive Sutton, honorary secretary of the Sole Practitioners Group, said he was “not in favour of layers of regulation, but it seems to have worked on this occasion”, making the SRA think twice.
“I couldn’t see many clients shouting out in favour of this, or many solicitors. The worst thing to do would have been to rush this through at renewal time. This is good news and it gives the profession the opportunity to think things through with greater clarity.”
Mr Sutton added that the issue had not gone away but the LSB would “put up as many tripwires as possible”.
Jenny Screech, legal professions manager at Zurich, said it was “entirely appropriate” that the proposed changes had been put on ice. “The original consultation was both misguided and untimely, and the uncertainty surrounding this issue has, in our view, caused the current renewal process to get off to a very slow start,” she said.
“Unfortunately this will cause a great deal of pressure for both solicitors and insurers seeking to renew professional indemnity insurance by the 1 October deadline. We agree that there are nonetheless important issues to be addressed and look forward to the opportunity to participate in a considered review once renewal has been completed.”
Jonathan Pryke, policy adviser for civil justice at the Association of British Insurers, described the LSB’s announcement as a “victory for common sense”.
Mr Pryke said: “The SRA’s proposals were misguided, had not been carefully considered and, if ratified by the LSB, would have left insufficient time for insurers and the legal profession to implement the changes before this renewal season.
“Allowing an extended period for debate and preparing a further impact assessment are essential before final recommendations can be made.”
A spokesperson for the Council of Mortgage Lenders also welcomed the LSB’s decision to take more time. “We remain unconvinced that there is sufficient evidence at this stage that the professional indemnity insurance proposals will result in premium levels being reduced,” he said.
“The CML previously raised concerns in our consultation response about reducing the cover to £500,000 minimum. We believe it would not be sufficient for the conveyancing market, as many claims may be for significantly more than this.
“The original proposed timing for implementation by October this year also raised significant concerns for lenders, solicitors and insurers to adjust in such a short space of time, which could have created potential unintended consequences.”
Colin Taylor, executive director for UK professional indemnity at Finex Global, part of the Willis Group, said postponing the decision removed the uncertainty over this year’s renewal period and was “welcome news for insurers, brokers and many firms that wish to finalise their renewal negotiations sooner rather than later.”
Mr Taylor went on: “Having been involved in the PII industry for as long as I have leads me to think that we may just find that by the time a decision is made the market cycle may have turned once again and the need to change no longer exists.
“The economy continues to improve and revenues for many firms are increasing once again. Perhaps the burden of PII premiums will reduce as a consequence.
“It is important to realise that the minimum terms have certainly served the profession well over the past 14 years. If a decision is made to reduce the minimum cover required, it will be difficult to turn the clock back if the hoped for reductions in premiums do not materialise.”