SRA announces further 12-month extension to SIF
The SRA received strong feedback following its consultation on the future of post six-year run-off cover
Following consultation on the future of post six-year run-off cover (PSYROC), the Solicitors Regulation Authority (SRA) has announced it will extend the Solicitors Indemnity Fund (SIF) for a further 12 months, until September 2023, while it considers consultation feedback in further detail.
The SRA launched a three-month consultation in November 2021. It sought views from the profession about the future of the SIF, which currently provides supplementary run-off cover for firms that have closed, providing ongoing long-term protection for clients.
The SRA directly engaged with around 3,200 people and 330 formal responses were submitted. It sought views on a range of options, including exploring different models for providing cover, ending the requirement for PSYROC, and seeking an alternative on the open market.
The SRA had previously indicated its preferred option was to close the SIF; it claimed the cost of running it was disproportionate to the consumer benefit it delivers in terms of volume and value of claims. However, the majority of respondents did not support the SRA’s preferred option of ending the requirement for PSYROC.
A number of key themes were identified in the feedback.
· There was a recognition that although the number of post six-year claim volumes are relatively small, the potential impact on individual consumers could be significant if no protections are in place.
· Law firms and solicitors expressed they are willing to contribute toward funding any future arrangements.
· The cost of funding any future arrangements, if passed on to individual consumers, would be minimal from their perspective.
· There is a risk that future post six-year claims may be volatile, not always remaining low, which could affect future funding requirements.
· The SRA said it recognised the strength of feedback that consumer protection in this area should not be removed, but that it still has serious concerns that the current costs of running the SIF are higher than they should be for the benefit delivered.
Anna Bradley, chair of the SRA, said: “The level and depth of feedback has been hugely helpful in giving us evidence to move our thinking forward. There was widespread agreement that providing appropriate consumer protection was key, but there is clearly still room for debate about how this might be delivered”.
In light of the feedback, the SRA has decided to carry out further work to assess whether there are options for providing consumer protection in a more proportionate way. It has also ruled out the open market solution.
Bradley said: “The Board has not made a decision on the future of PSYROC at this stage, but has asked for further policy work to be done, which will be brought back to it before the end of the summer. If a new arrangement were to be proposed, a further public consultation would be carried out on the detail.
She added: “We want to work closely with stakeholders, including particularly the Law Society, to build on the constructive ideas we heard from the consultation, and explore credible, value-for-money options that could provide efficient and effective consumer protection. We can then make a decision on the long-term position”.
The Law Society has strongly campaigned for the continuation of the SIF, arguing closure would have a detrimental impact on consumers, leaving them unable to seek redress on the rare occasion something goes wrong.
Law Society president I. Stephanie Boyce said: “We are delighted the SRA has listened to our concerns about closing SIF and has instead given the fund another chance.
“In the lead up to September 2023, the solicitors’ regulator will refrain from deciding on SIF’s future while further work is done on whether consumer protection can be delivered in a more cost effective way”.
Boyce suggested: “Possible alternatives to SIF include making changes to how the fund is set up and operated, reducing the scope of protection it gives, or finding a different consumer protection vehicle funded via SIF’s surplus – which may also be subsidised by the profession”.
“We are pleased the SRA has heard our arguments about the importance of continuing consumer protection, rather than run the risks of not doing so, which would leave consumers unable to claim compensation for flawed transactions affecting wills, buying a home or child personal injury cases.
“The Law Society stands ready to support the SRA as they explore further options”, she concluded.
Bradley explained the further extension of the SIF is subject to formal approval by the Legal Services Board and added: “Before then, the SRA will also need to obtain formal confirmation from Solicitors Indemnity Fund Limited (SIFL) that this extension is affordable without an additional levy”.
The full report on responses to the SRA’s consultation is available here.