Philip: No sign of PII market failure
Solicitors need to understand better the different roles of the Law Society and Solicitors Regulation Authority (SRA), the chair of the SRA said this week.
Anna Bradley said solicitors “don’t always appreciate the difference” between the two.
Delegates at this week’s SRA compliance officer conference called on the regulator to help the profession in ways that were more appropriate for the Law Society, such as in deciding on the best technology to buy and with a hard professional indemnity insurance (PII) market.
Ms Bradley said: “It’s important that people understand better the role that we can play, and we want to work with people like the Law Society to provide the evidence that will help them to play their part [too].”
She said there was a “grey area” in some of the regulatory objectives set out in the Legal Services Act 2007 and this was one of the reasons that the SRA has established a separate legal entity.
“[We] can be clear on both sides who does what and how we will work together on that middle area so that people get what they need.”
Chief executive Paul Philip added: “What solicitors are asking for is help but they’re not absolutely sure who should provide it.”
Questions about rising PII premiums were put to him during a Q&A session at the conference and Mr Philip said several solicitors had come up to him during the day to press the issue as well.
However, he made clear that the SRA has “no intention of intervening in the PII market at the moment”. There was, he stressed, “no sign of market failure”, which was the point at which it might step in.
“The real question for us is when does it become something that we should do something about in terms of the regulatory objectives.”
Mr Philip pointed out that the number of firms that did not secure cover was even lower this year than last. “There is not a whole load of people going out of business because they haven’t got PII,” he said.
He suggested that, in response to rising premiums, “insurers would say you’ve had some years of a soft market [and] you’ve got to take the rough with the smooth”.
Though the SRA is often criticised by solicitors and insurers for how exacting the minimum terms and conditions of insurance are, Mr Philip pointed out that, when in 2019 it tried to reduce the minimum level of cover from £2m to £500,000, the opposition was so strong that it dropped the plan [1].
The Law Society came out in support of the SRA’s position on PII. A spokeswoman said: “While there are adverse conditions in the insurance market at this time, and we understand that it is causing difficulty for some members, the protections provided by the SRA’s current minimum terms and conditions are considerable, and there is little evidence to suggest that reducing protections would lead to any substantial reduction in the cost of insurance.
“It would be a mistake to look at the immediate problems presented to the profession by the hard market and respond by radically overhauling solicitors’ PII.”
However, she reiterated the Law Society’s opposition to the SRA’s proposal [2], announced this week, to remove post-run-off PII cover for firms by closing the Solicitors Indemnity Fund – another example of an issue the regulator believes is better dealt with by the Law Society.
The SRA argues that “maintaining a regulatory scheme to deliver ongoing post six-year run-off cover is unlikely to be proportionate in light of the level of consumer protection it provides”.
On other issues, Mr Philip would not be drawn on whether he was hopeful that the Ministry of Justice would this time support the latest plan to increase [3] its internal fining powers from £2,000 to £25,000, as it will need a legislative change.
But he said there had been a “surprising amount of agreement” when discussing the issue with the government and also the Solicitors Disciplinary Tribunal, which has also opposed previous attempts to increase the power.
He revealed too that the number of misconduct cases about non-disclosure agreements had fallen since the SRA issued a warning notice about them, and suggested that IT competency was likely to form part of the Solicitors Qualifying Examination in future.