The SRA, which governs the commercial legal profession, launched a consultation in October on its proposal to end the current renew cover regime, which requires law firms to renew their insurance (PII) from 1 October each year. Instead, practices will be allowed to renew any time of the year, effective October 2011.
The SRA has also floated a number of other changes, including: to exclude PII for claims arising from work done for financial institutions; to cut the time a firm can stay in the assigned risks pool (ARP) from 12 to six months; and to clarify the requirements on insurers to provide information to the SRA regarding firms that fail to pay their premiums or have misrepresented information.
There are additional proposals being reviewed for implementation after October 2012. These include: changing the role of the ARP, potentially by ending its role as a provider of policies of Qualifying Insurance completely; altering the way in which the ARP shortfall is funded via a levy as a percentage of insurance premiums; and considering whether insurers should be able to cancel policies for non-payment of premiums.
The ABI has backed the proposals. Kate Carr, the ABI’s assistant director of markets and regulation, said: “This market cannot tolerate periodic crisis, caused by a combination of poorly enforced regulation and restrictive policy requirements, such as insurers’ requirement to stay on cover when premiums are not maintained, and exacerbated by significant increases in claims in recent years. Over 350 solicitor firms are now in the Assigned Risks Pool and this is simply unsustainable.
“We hope this report will spur the legal profession into working with us to ensure that these overdue and urgent changes can be introduced to bring stability and sustainability back to this market,” she added.