Changes to SRA rules will help solicitors to ‘switch’ between regulators
9 August, 2017
Proposed changes to Professional Indemnity Insurance (PII) rules will make it easier for law firms to ‘switch’ between approved regulators, the Solicitors Regulation Authority (SRA) has said.
The SRA has announced plans to overhaul existing rules in a bid to encourage greater competition in the regulatory market.
Currently, law firms ‘switching’ from one approved regulator to another have to obtain six years’ run-off cover for their professional indemnity insurance.
In this situation, firms often find themselves needing to have dual insurance cover in place, which the SRA says can often act as a ‘barrier’ to firms switching approved regulator, thus hindering competition in the regulatory market.
But the SRA says that new plans – which would see that run-off cover is “not necessarily” triggered when a firm switches to another regulator – will improve competition while simultaneously “still offering protection for the public”.
It explains: “The new regulator will then be solely responsible for making sure there is adequate indemnity insurance available for future claims for financial loss. This includes claims for prior work carried out, or in progress, before the switch.”
To make sure that all clients remain protected, the SRA is working alongside approved regulators to agree a framework which will enable insurance information to be freely shared when a firm wants to move to another regulator.
Crispin Passmore, Executive Policy Director at the SRA, said: “There was overall support for our proposals to remove the obligation for run-off cover if a firm switches regulator.
“The current approach makes it difficult for firms to be able to switch to the regulator they feel is right for their business.
“This change would give firms that choice, encouraging a modern, competitive market that provides affordable and accessible services for the public and businesses,” he said.
“We recognise that although such a change could have benefits for consumers, there are potential risks around protections for clients. We are therefore working closely with the other legal regulators on a switching protocol.
“This is to make sure consumers remain protected and the new regulator has all the information they need to establish [that] the transferring firm has adequate cover, including for past activities,” he said.
“The way we are proceeding provides a clear, straightforward approach to making sure appropriate consumer protections are in place,” he added.
The Legal Services Board will need to approve the changes before they go ahead, but the SRA insists it is aiming for the change to be enforced before the beginning of October this year.
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