Regulator is proposing a large reduction in minimum cover
Solicitors are to cut professional indemnity limits under new rules proposed by their regulator.
The Solicitors Regulation Authority believes it will help smaller law firms bag more affordable premiums.
The current rules mean that law firms must have a minimum cover of £2m for a single claim, rising to £3m for firms with certain structures.
But the SRA says data proves these levels are ‘too rigid’. The SRA instead proposes:
- Reduce the maximum single claim limit to £500,000 (£1 million for conveyancing)
- Keep the need for a six year run off period of insurance after a firm closes but capping the overall level of cover at £3m for firms that have done conveyancing work and £1.5m for other firms
- Remove the need for compulsory insurance to include cover for large commercial clients
The SRA says 10 years of PII claims data reveals that 98 percent of claims are settled for less than the proposed £500,000 single claim limit. The data also shows that half of all claims relate to conveyancing matters.
SRA chief executive Paul Philip said: “Ten years of data shows our current one size fits all arrangements are too rigid.
”Our proposals will help firms - particularly small ones - make sure they are not paying more than they need to protect themselves and their clients.
”The public would still have an appropriate level of protection, while potentially benefiting from lower costs and more choice.
“We recognise this is a complex area, with no easy solutions. We are open to options, and keen to hear views on how we make sure we get the balance of protections right.”
The deadline for the consultation ends of June 15.