Unregulated providers are leading the way with developing consumer-facing legal technology, showing that the way solicitors are regulated is “not an obstacle to innovation”, a report on the Legal Access Challenge has found.
But a lack of consumer trust when lawyers are not involved could explain the slow development of such solutions.
The challenge, run by the Solicitors Regulation Authority (SRA) and innovation charity Nesta Challenges with £950,000 of government money, aimed to broaden access to legal help for individuals and small businesses through technology.
Eight ideas were shortlisted  and the winners, announced in April , were RCJ Advice with Rights of Women for a technology platform supporting survivors of domestic abuse, and Mencap with Access Social Care for a chatbot helping people with learning disabilities understand their social care rights.
The SRA and Nesta both produced reports on the challenge, published today.
The SRA said the challenge showed that much consumer-facing innovation – including all eight finalists – was coming from outside the regulated legal sector. Only 15% of the 117 applications were fronted by regulated law firms.
“This offered fresh insight into how legal technology solutions may develop in this sector. The likely high concentration of services offered by unregulated providers also raises questions of trust. Research by the Legal Services Consumer Panel suggests that 47% of consumers lack trust in AI technology when used to deliver legal services.
“Public focus groups we ran on the back of the challenge showed a general preference for regulated providers, and caution when it came to the option of legal help from providers who are not regulated law firms or solicitors.
“Lack of consumer confidence could be one reason why the progress of legal technology solutions lags behind other sectors such as financial services.”
It said regulators needed to consider how they address consumer trust if the potential benefits of such legal services were to be realised.
“We will need to work with others to explore whether there are more flexible cross-regulatory approaches to provide consumers with the assurances they need.
“This will be even more crucial as legal technology develops, and the boundaries between unregulated and regulated legal help and advice are likely to blur further.”
A further problem was “low technical knowledge and awareness amongst the innovator community about the Legal Services Act 2007’s regulatory requirements and the interplay between the regulated and non-regulated sections of the market”.
The SRA said: “Many lawtech solutions are being developed by non-regulated organisations. Innovators do not know what the regulatory requirements are to involve solicitors or regulated firms in some way with the innovation.
“There is therefore a risk that new platforms might find it difficult to expand to provide opportunities for access to advice given by solicitors.
“We may therefore have a role in providing useful guidance for all lawtech providers to allow them to understand some of the key factors of operating in this market.”
It would also look to address solicitors’ uncertainties, for example issuing “tailored guidance” on the use of particular products and services, such as digital ID checking, to address the assumption by some solicitors that regulation would not allow them to use it.
More generally, the SRA said the challenge “showed that regulation is not an obstacle to innovation, since our regulation is principles based and not prescriptive – even more so since the introduction last year of our new Standards and Regulations”.
However, there were “other softer barriers which may not be in the gift of a single regulator to solve”, such as overlapping regulatory regimes.
The SRA said providing innovators with useful guidance needed “careful management and input from other organisations”, including the Financial Conduct Authority and the Information Commissioner’s Office.
Nesta’s report agreed that SRA regulation was not a barrier to innovation, but listed eight others.
These were headed by “cautious and risk-averse attitudes” among practitioners, followed by the “fragmented nature of the legal sector”, and challenges in developing attractive business models for new services while maintaining affordability.
Other problems were lack of access to data, such as court data and standardised client data, “resource constraints” within the not-for-profit and advice sector, and low awareness of digital legal services.
Seven of the eight finalists said the challenge had accelerated development of their solution, six agreed that it provided them with support they would otherwise not have been able to access, helping to clarify the objectives of their solution, five said they had developed a completely new solution or functionality, and also built new partnerships, while several also raised further investment and grant funding.
The regulator said the success of the challenge led it to consider whether to apply for another project to support access to justice through technology through an application to the second round of the Regulators Pioneer Fund.
Nesta concluded that innovation in legal services delivery was “needed now more than ever as providers across the legal services sector are having to adapt their services in response to the ongoing Covid 19 crisis…
“The experience of the last few weeks and months shows us that change at pace is possible.”
Chris Gorst, Nesta’s director of challenges, added: “The Legal Access Challenge has demonstrated the game-changing potential that technology offers in improving access to legal services for individuals and small businesses.
“It has sparked a crucial conversation with the legal sector on how we widen access to legal services and we are pleased the insights we’ve gathered are helping inform the SRA’s policies so they can support even more innovators in future.
“Importantly, the Legal Access Challenge has helped to build an ever-growing community of lawtech innovators, passionate about improving access to justice.”