LSB extends assessment period for PII reforms

The Legal Services Board (LSB) has published a list of correspondence from numerous stakeholders who oppose the Solicitors Regulation Authority's (SRA) plan to reduce minimum PII cover to £500,000.

The Law Society, the Legal Services Consumer Panel and experts have already publicly voiced their resistance to the SRA's plans. Now, insurers, mortgage lenders and a total of 26 law firms have weighed in with their concerns.

Further submissions have been made by the Council of Mortgage Lenders, the Association of British Insurers, the Building Societies Association, Nationwide Building Society and Zurich Insurance and such firms as Thurstan Hoskin Solicitors and Weightmans.

The director general of the Council of Mortgage Lenders, Paul Smee, commented: "The extremely short time frame for which to implement the rule changes compounds the likelihood that lenders are forced into taking fast and potentially drastic action to protect their current pipeline of work."

Jenny Screech, a solicitor and legal professions manager at Zurich Insurance, wrote: "The SRA's proposals appear to be based on the false and misguided premise that such change will lead to a meaningful reduction in premiums and that, in turn, that saving could be passed on to clients, thereby increasing access to justice. However, there is no credible evidence that this is the case."

While Robin Fieth, the chief executive of the Building Societies Association, also raised concerns and said: "It wouldn't be unreasonable to expect some lenders to reduce the size of their legal panels to reduce both risk, and the administrative burden that this change will introduce. Clearly this goes directly against the objectives of the Legal Services Act as it could significantly reduce competition for conveyancing services."

Responding to the various submissions, Crispin Passmore, the SRA's executive director for policy, said: "Requiring firms to have in place a level of cover which is appropriate, will mean that consumers will not have to pay for a level of cover which is not necessary, as some are doing currently, nor be underinsured because of an arbitrary limit without responsibility for higher cover where appropriate."

Passmore disagreed with the submission made by Legal Risks' Frank Maher and the suggestion that reduced PII premiums will not benefit consumers, saying: "While we acknowledge that insurance is but one of a number of overheads, a reduction in premiums will make a positive contribution to the overall price of legal services - even if that is to mitigate other upward pressures. Legal Risks' argument could only be true if there was no competition in the legal services market and if demand was price inelastic."

The LSB received the SRA's application on 15 July and had an initial 28-day period in which to assess the proposals. After completing its initial assessment of the SRA's application, the LSB's chief executive, Chris Kenny, wrote to the SRA advising that the regulator has decided to extend the initial decision period due to the "complexity of the issues raised" and "additional time required to assess it".

The LSB now has until the last working day before a 90-day deadline of 12 October to make a decision or issue a warning notice.

On the LSB's decision to extend its assessment period, Passmore commented: "The LSB has always had the option of extending its assessment periods and often does so: this is not an unusual move. We made clear in our application to the LSB that a positive decision by the end of August would allow the rules to come into force in time for the 1 October 2014.

"If the LSB does not make a decision in time, or does not approve the rule changes, then the current rules remain in place for those policies that need to be renewed on 1 October. The ball is very much in the court of the LSB, and we will comment further when appropriate."

The full list of submissions to the LSB can be viewed here.

 

Non-responsive Frank Maher is a partner at Legal Risk "It is gratifying that the LSB has grasped the importance of the issue, but important that anyone sharing our concerns provides the LSB with evidence on which to base its decision. "The decision must have regard to the regulatory objectives. We addressed this in our submissions but I do not believe others have done so specifically and the SRA's response has not addressed this, nor indeed many of our other concerns."