Due to problems within existing solicitors’ professional indemnity insurance arrangements, the Council of Mortgage Lenders have called for a conveyancing market review.
Some solicitor firms have had difficulties obtaining suitable professional liability insurance due to the size and number of claims over the past few years. The Solicitors’ Regulation Authority has responded by proposing to remove the compulsory nature of business liability insurance in regards to financial institutions.
Members of the CML have recently responded by stating that the current arrangements are in dire need of reform. However these reforms should be accompanied by tighter regulation and a more focused approach to the causes of the conveyancing profession’s problems, such as professional negligence and fraud.
The CML has stated that proposing to remove business insurance cover for financial services providers will not properly address the issue of rising conveyancing claims under financial protection arrangements as they currently exist. Lenders also stated that it would also significantly impact the legal services market, which is currently in flux already.
Solicitor firms who are either unwilling or are unable to cover lenders may see a substantial decrease in their conveyancing business as lenders refuse to keep them on their conveyancing panels or refuse to transact with them. This may lead to a number of firms either closing down altogether or simply moving out of of the conveyancing market. This would result in consumer choice becoming more restricted.
The CML instead suggested that a more appropriate approach would be the introduction of a more clearly defined and focused set of insurance terms and conditions at a bare minimum.
Currently any conveyancing firm that cannot obtain proper insurance cover in the open market needs to avail themselves of the asigned risk pool. The ARP was designed in order to provide a safety net for those firms seeking rehabilitation in order to regain open market cover.