Cuts to minimum PII rejected
7th Dec 2014
The current level of cover is £2m for firms, or £3m for incorporated firms and LLPs, but the Solicitors Regulation Authority (SRA) had proposed limiting this to only £500,000, claiming it would help smaller firms and ‘create more flexibility’ in the market.
Chris Kenny, chief executive of the Legal Services Board (LSB), said that the LSB welcomed a comprehensive review by the SRA of financial protection arrangements, but that firms need ‘the right incentives to assess their risks accurately and so ensure that consumers are protected’. The LSB found it unclear as to how the cuts would help achieve this, and was unconvinced by the evidence put forward. It is understood that there is still an option to make another application in the future.
Paul Philip, SRA chief executive, stated in September that the current level of cover was arbitrary and inappropriate, but the SRA proposals were criticised by many, including the Law Society, Legal Services Consumer Panel, mortgage lenders and practitioners. He has now said that the decision was ‘disappointing’, but refused further comment until the correspondence was considered.
Now, the Law Society have welcomed the decision to reject the proposals, with President Andrew Caplen stating that such changes would have increased consumer risks and firm costs, given that the amount of cover would be insufficient for the majority of firms. He noted that it would have resulted in firms having to buy ‘top-up cover’, which would have been more expensive.
Some parts of the SRA’s application were approved by the LSB, including those relating to the introduction of a new outcome in the SRA’s Code of Conduct 2011. These changes will require firms to assess their level of PII, and purchase it appropriately, alongside technical amendments to the SRA’s regulatory arrangements.