19 August 2014
The Legal Services Board (LSB) has extended the time it has given itself to decide on the proposed cut in the minimum indemnity cover limit for law firms from 10 October this year to 17 August 2015.
The SRA responded by announcing that the change “will not now come into effect before October 2014”.
The LSB’s decision came in a warning notice issued to the Law Society, informing the society that it was “considering whether to refuse in part” plans by the Solicitors Regulation Authority (SRA) to cut the limit from £2m to £500,000.
The main reason given by the LSB in the notice, served under the Legal Services Act, was that the move “could be prejudicial to the regulatory objective of protecting and promoting the interests of consumers”.
In a letter to Paul Philip, chief executive of the SRA, Chris Kenny, chief executive of the LSB, said there was a “clear policy need” to examine whether the appropriate balance was being struck between client protection and additional costs to the industry.
Mr Kenny welcomed the SRA’s decision earlier this month to announce a call for evidence on its indemnity reforms.
“The LSB considers that the SRA is right to examine all the options, rather than operating on the assumption that the current position is necessarily the right basis from which only incremental change may be needed.
“It should not be taken as read that the current arrangements are underpinned by a very strong evidence base, as opposed to simply being the result of custom and practice.
“In that respect we note the general absence of data in the submissions made to the LSB by other stakeholders, as well as in the application itself.”
Mr Kenny added that there was “limited evidence” that costs savings would be achieved and the potential impact on the Compensation Fund had not been fully explored.
He said that the LSB needed further evidence by 5 September this year, to determine the application by the end of that month.
Charles Plant, chairman of the SRA, said the regulator was “obviously disappointed” that the LSB had issued the warning notice.
“The immediate impact is that the changes we have proposed in relation to reductions in mandatory cover cannot now take effect in October this year,” he said.
“In principle, I think this is the wrong decision and we remain convinced of the case for changing the arrangements for professional indemnity insurance, in order to deliver benefits for solicitors and consumers alike. We will, therefore, continue to develop our proposals on this issue.”
Tags: indemnity, Legal Services Board, Solicitors Regulation Authority
Leave a comment
* Denotes required fieldLegal Futures Blog
Why your firm should support working mothers to the hilt

If you are going to balance the demands of work and childcare, and stay sane, you need to adapt, and with any luck your firm will adapt with you. In doing so you will both win, and your respective productivity will soar. When I had my son, I realised just how lucky I was. Not only did I have the incredible support of my, and my husband’s, family through this life-changing time, but I had a firm that offered me complete flexibility and control over my return to business life.
Associate News
CILEx launches National Awards to celebrate the best in the profession
First4Lawyers urges MPs and peers to “repair the right body” in new PI reform campaign
iManage sees wave of momentum among legal departments
Redbrick Solutions join the Conveyancing Association
Temple Legal Protection appoints new Business Development Manager Richard Steel
More firms choose Tikit P4W for practice and case management in what has been a record sales year for Tikit
Eclipse announces new functionality to cater for the Precedent S Electronic Bill of Costs