PI insurance market may change yearly renewal scheme

In the run-up to the Alternative Business Structures slated to go into effect in 2011, the Solicitors Regulation Authority has come out with proposals for a number of changes to the professional indemnity insurance arrangements for solicitor firms.

After the SRA commissioned an independent review this past summer, the regulatory body has proposed changes to the renewal scheme for the professional liability insurance cover required by every firm.  Instead of having just one single renewal date, the SRA instead suggests moving to a scheme in which firms can renew at any time during the year.

The regulator is also keen in implementing a reduction in the amount of time solicitor firms may stay the Assigned Risks Pool by half. A programme which assures that firms that cannot procure business liability insurance cover or afford the available terms, the ARP currently provides cover for such firms for 12 months.

Consultancy firm Charles River Associates conducted the review, which will now be carefully examined in detail by the regulatory body until the end of February of the coming year.  The changes agreed to by that date will then be set in stone in October of 2011.

Chief executive for the SRA Antony Tonwsend commented that there is widespread acknowledgement that the current insurance arrangements may provide valuable client protection, the crisis created for many solicitor firms when it comes time to renew is disruptive.  Mr Townsend also stated that the legal services market has changed materially in a way that the old scheme is no longer a proper fit.

The SRA is also currently deciding whether it should be a requirement of firms that choose to enter the ARP face compulsory disclosure of the reasons the open insurance market refused to cover them, which may involve insurers being asked to divulge information on legal services organisations that neglect to considering whether firms entering the ARP should be forced to pay their premiums or that are suspected of misrepresenting information.

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