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Consumers like indemnity insurance, LSB panel research finds

Making it optional would hit vulnerable consumers the hardest

7 February 2013

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Consumers want lawyers to have compulsory indemnity insurance and do not want it watered down or made optional, research for the LSB’s consumer panel has found.

Vanilla Research based their report on 12 focus groups made up of consumers from a range of backgrounds who had used legal services in the past two years. The groups met in London, Oxfordshire, Exeter, Manchester, Birmingham and Cardiff.

“The consistent view, across all types of legal services consumer, was that they are reluctant to see any loosening of regulatory protections, even if it results in benefits in terms of lower regulatory costs or wider consumer choice,” researchers said.

“The feeling is that few consumers are confident they can deal with solicitors on an equal footing, and any lessening of regulatory protections would tip that balance further away from them.”

Vanilla Research found that if the requirements for regulation were loosened, and consumers expected to make their own arrangements for consumer protection, the results would be “far from optimal”.

Few consumers would feel able to make informed decisions, shop around for the most appropriate level of protection and the more vulnerable consumers, such as those with low literacy levels, would feel “cast adrift”.

“Under these circumstances, active/sophisticated consumers may look for credible signals such as firms that have insurance, but naïve and vulnerable consumers may either pay no attention or take the risk and pay lower prices.”

Elisabeth Davies (pictured), chair of the legal services consumer panel, said: “Protection against risks of fraud, negligence and insolvency shouldn’t be an optional extra, but guaranteed for all consumers.

“These are risks that consumers can’t reasonably foresee or control so they should be taken care of by the regulators. There’s a danger that removing compulsory safeguards would hit vulnerable consumers the hardest.

“As household budgets continue to be squeezed, there’s a real danger that some consumers might be tempted to save on costs by forgoing insurance cover today, but end up paying a heavy price tomorrow.”

Vanilla Research said one suggestion from the focus groups was a small claims court for professional negligence actions against solicitors.

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