The Council for Licensed Conveyancers has opened up a consultation on professional indemnity insurance which they say will help firms switch regulators.
If enacted the proposals will enable firms to find PII on a completely open market with providers signing up to minimum terms and conditions set out in a Participating Insurers Agreement.
Another proposed change is the inclusion of run-off cover in the policy. Under this new arrangement, insurers will be obliged to provide six years of run-off cover for a firm which closes.
The CLC say this run-off cover will be provided to firms at no additional cost at the time of closure. This removes a significant challenge of planning for firms and addresses a risk to consumers. The limit on claims in the six-year run-off period will be £2m in aggregate. Past patterns of claims made since 2011 make it clear that this limit would be more than sufficient. Brokers to the CLC Master Policy have confirmed that since 2011, the aggregate claims paid have not exceeded £100,000 per practice.
The CLC also say these changes will make it easier for firms specialised in property law to transfer into regulation by the CLC. At the moment, SRA practices are required to purchase six years run-off cover at the point of leaving the SRA regime. This often proves to be a major disincentive to exercising free choice of regulator. This may no longer be necessary if the SRA decides to waive the requirement for transferring firms, a possibility on which it is currently consulting. If the SRA retains its requirement, the CLC believe their new scheme will increase flexibility for firms.
Chief Executive of the CLC Sheila Kumar said: “The CLC’s proposed new arrangements for Professional Indemnity Insurance will bring improvements for consumers and lawyers in three main ways. PII arrangements will be more streamlined and so easier to manage for CLC practices, insurers and the CLC itself. They will improve protection for consumers and reduce the exposure of the Compensation Fund as run-off cover will be in place for all closed practices.
“Finally, they will help to make a reality of the, currently largely theoretical, freedom for firms to choose the most appropriate regulator. The consultation period for these changes is short because we have already consulted the current insurers of Licensed Conveyancers and because we want consumers and firms to benefit from the new system with effect from this spring’s PII renewal round.”