Unbundling: Agreed definition will address insurer confusion
Work to agree a definition of unbundled legal services with professional indemnity insurers is close to completion as part of efforts to make unbundling easier for solicitors.
The Law Society, which is softening its position on unbundling, said: “This pragmatic approach recognises that some legal firms, such as those practising in family and employment law, are routinely providing unbundled services and that confusion and uncertainty are to the benefit of neither the legal profession nor consumers seeking legal help at a lower cost.”
Figures from the Legal Services Consumer Panel showed that the proportion of legal services consumers choosing to use an unbundled service has increased in recent years, reaching an estimated 19% in 2023.
The Law Society’s work on the issue has included research which found that solicitors providing unbundled services “would ideally like [it] to adopt a less risk averse and more supportive stance” than it has hitherto – they wanted to see the society “move with the market and recognise the increased consumer demand for unbundled services”.
The review of the society’s position on unbundling was done as part of its 21st Century Justice project, the headlines of which were published yesterday.
The project’s final report acknowledged that unbundling could help more people to access justice from a regulated lawyer who may otherwise have been unable to pay for a full service.
The research, by Mustard, showed how it improved cash flow for firms through faster payments and an increased client base.
There was also “appetite” from regulators – including the Solicitors Regulation Authority (SRA) in a 2023 report – and the previous government to position unbundled legal services as an access to justice solution.
But there were the well-known disadvantages, particularly around developing a limited retainer “precise and effective enough to delineate the work of the client and solicitor which gives rise to the potential for ‘scope creep’”, as well as the risk of solicitors being held liable for work outside retainer agreement.
It could also be unclear whether professional indemnity insurance covers unbundled work and potential negligence claims, the report said.
There were concerns too that unbundled services “may not deliver positive outcomes for clients who may lack the skills to fulfil their role within the process, potentially leading to further disputes”.
The report said there was confusion among both law firms and insurers about what unbundled legal services actually entailed.
“Some insurers were uncertain about whether firms they provided insurance for delivered unbundled services, and if so, how any attendant risks should be priced.
“Our research, although based on a small sample, suggested that a third of firms that said they were providing unbundled services had informed their insurer.
“It is likely that due to this lack of clarity, insurance underwriters are unable to price risks accordingly as they lack the data to assess the specific risk. The costs of insuring unbundled work are therefore potentially being born by solicitors across the profession, rather than those firms that are offering unbundled services.”
As a result, the Law Society, the SRA and the International Underwriting Association – which represents SRA-approved insurers – have been working towards a commonly agreed plain-language definition, which the report said should be agreed this summer.
They may then collaborate on producing guidance for practitioners on unbundling.
The report said: “Once agreed, a definition could be used by participating PII insurers in their proposal forms, to identify firms that provide unbundled services, and price their policies accordingly.
“This may help make the costs, risks and responsibilities for both consumers and practitioners engaged in unbundling more transparent, to the benefit of all.”
The Law Society and SRA have also considered alternative terminology to aid consumer understanding, such as ‘pay as you go’ legal services, ‘targeted legal services’ and ‘professionally assisted legal services’.
“Further work would be required across the legal and consumer sectors to implement a meaningful change in terminology which leads to an increase in consumer understanding.”
Leave a Comment