Alternative business structure may bring professional indemnity Insurance woes

Several law firms have been forced out of business thanks to the rising costs of practising certificate fees and professional indemnity insurance premiums.  More damage may be done thanks to deeper cuts to legal aid expected to go into effect this year as well.

In the face of increased competition, many firms are currently considering if a switch to an alternative business structure could bring an end to their financial woes.  However many companies are also questioning the need to regulation in the first place.

The government’s  Legal Services Act 2007 goes into effect on 6 October this year.  Many firms will take advantage of the new alternative business structures as a way to avoid mandatory professional liability insurance cover.

The act was precipitated by a campaign by the consumer lobby to allow non-lawyers to provide legal services to customers in an effort to reduce business liability insurance premiums.

Many firms could easily deregulate and simply pass instructions to an ABS or counsel on occasions that necessitated such actions. This would bring an end to disciplinary tribunals, penalties for inadequate professional service, expensive fees for practising certificates, and costly professional indemnity insurance.

Legal experts are instead concerned about an influx of up to 5,0000 unqualified entrants into the legal advice field that the ABS framework may bring.  Local authorities, universities, and claims management firms could all begin dispensing legal advice.

The sector is currently largely devoid of regulatory activity, entrepreneurs are realising.  While having someone who formerly was a solicitor managing the particulars of their case may not be considered a disadvantage for a member of the public, someone without any formal legal training or experience could be another matter entirely.

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