Editor's blog | The value of regulation

The consumer panel’s pre-emptive clarification about professional insurance in its latest report on risk and regulation sounds worrying, at first. No organisation, it says, has made a policy decision that lawyers should no longer be required to take out insurance and invite consumers to purchase optional cover instead. What, then, made the panel think it would put this “hypothetical scenario” to 12 focus groups of recent consumers of legal services?

No doubt most solicitors would be happy to forgo the painful process of form filling and the even more painful moment when they hand out a cheque to their professional indemnity insurance provider every year. But most also know that, on balance, compulsory insurance is a much better proposition for the profession as a whole than shifting the risk on consumers. Lawyers offering clients one-off insurance cover when buying legal advice has the unsavoury taste of payment protection insurance or extended warranties from a discount store. The distinction is perhaps more philosophical than practical, but this is what makes the legal profession stand apart from others. Despite the drive towards commoditisation, legal advice is not like buying other products or services.

So there is no obvious reason, it seems, why the panel would suddenly be asked by the Legal Services Board to look into this question. The issue isn’t one that appears to have preoccupied the profession or consumer organisations, unlike, for instance, will writing – in respect of which the LSB is poised to make formal recommendations to the Lord Chancellor that it should be a regulated activity.

The timing is, in fact, near perfect. In just over a month we will be celebrating the first anniversary of the first alternative business structures. The liberalisation of legal services is yet to shake the foundation of the sector, but the old benchmarks are already under threat. Sure, the regulators have addressed the issue to an extent: the SRA’s introduction of outcomes-focused regulation and the centralisation of complaints around LeO, for instance. The increase at the beginning of the month of LeO’s fining powers should also help bring all operators on the same footing, however harsh some firms find this.

There is a lot still to do as the profession moves towards a more open, business-like and client-centric approach in a world law firms will have to share with retailers. But, discretely, what the LSB is also doing is pushing back the government’s assumption that “too much regulation” can undermine trust and lead to “a lack of resilience in communities”. It is only the beginning of a longer-term initiative aimed at assessing the division of risk and responsibility between consumers and businesses in the sector, but solicitors should start taking an interest now.

Regulation is far too often seen as a bothersome framework choking solicitors in red tape. It can also be a powerful kitemark for a sector keen to consolidate its professional values.