The SRA will announce another wide-reaching consultation around the provision of financial protection for law firms this spring. I would encourage all firms to have a read of the consultation when it is released and to at least form an opinion of the potential impact that any proposed changes may have.

There is speculation that the consultation will include some recommendations that will represent the most radical changes to Professional Indemnity Insurance (PII) for the legal profession since the Solicitors Indemnity Fund (SIF) was disbanded back in the year 2000. It has been suggested that some of the proposed changes could be as follows:

      • Lowering the compulsory limit of indemnity to £500,000;
      • Allowing the potential for an aggregate limit of indemnity rather than an each and every claim
      • Removing cover for cyber related thefts from client account;
      • Removing cover for claims made by more sophisticated clients such as financial
      • Removing cover for conveyancing work completely;

So what will this mean for your firm? In my opinion, the profession has been very lucky to have the protection of the minimum terms and conditions (MTC) since 2000 and in some respects the MTC has ended up providing cover for law firms (and their clients) that was never really intended. The advent of client account cyber frauds is the most recent and relevant example. There is a clear agenda among the participating insurers and to some extent the SRA to ‘water-down’ the MTC and to allow law firms to pick and choose their cover. The SRA clearly feels that there needs to be a more flexible approach to PII in order to ensure that they can compete with other regulators that are increasingly threatening their place in the legal services industry.

While it is hoped that these changes may have a positive impact of premium levels, particularly for smaller firms, are they really a good thing for the profession as a whole, or not? It may well be for the firms that have their houses in order, but for others, this will create new challenges. In reality, my view is that this will lead to insurers scrutinising law firm’s policies, procedures, systems and processes more so than ever before. Your approach to risk management will be looked at in more detail than in previous years. If any of these changes are approved then they will be implemented in 2018, so no-one can afford to be complacent.

I have highlighted a couple of the bullet points above as I suspect that these are particularly key issues for readers of this article. If insurers are given the opportunity to offer limited cover with regard to cyber claims and conveyancing work, they will do so! However, if you can demonstrate that your firm has a robust approach to dealing with cyber related issues, then you will be fine and your firm will still be able to secure competitive PII cover. Continuing risk awareness and education of your staff has to be demonstrated and I would encourage you to engage with your insurer and respond to any communications they send you in this regard. You will also need to demonstrate the controls around your client account and prove that you have a sophisticated approach to the management of cash within your firm. When it comes to conveyancing, you will again need to demonstrate that you have a process and the right people in place that will protect your clients and ultimately your insurers.

As is usual with any proposed change, if implemented these changes to Professional Indemnity Insurance for the legal sector will represent an opportunity for forward-thinking firms with the right approach but will provide a challenge for those firms not willing to adapt. Plenty of food for thought for the New Year!


Jake Fox is Managing Director at JM Glendinning (Insurance Brokers) Professional Risks Limited, a specialist insurance broker dedicated to the legal profession.