Posts Tagged ‘SRA’
Client financial protection arrangements
The SRA are seeking your views on our proposals for amendments to our client financial protection arrangements.
The key changes proposed for October 2011 are
Options for discussion for October 2012 or beyond include
The deadline for responses to this consultation is 28 February 2011.
To take part or to find out more, visit www.sra.org.uk/consultations
PI Market has a new player
The Gazette story tells of a new player in the PI market. Not entirely new to the UK market place they will be a welcome addition for some firms.
PI Insurance Market
The renewal date for firms Professional Indemnity policies looms and we find ourselves, as a profession, facing one of the most uncertain times since the introduction of the ‘open market’ insurance provisions.
| CAPITA HIGH RESERVE | |
| Year 28/04/2010 | |
| 2000 – 2001 | £140,779.50 |
| 2001 – 2002 | £42,000.00 |
| 2002 – 2003 | £349,804.00 |
| 2003 – 2004 | £437,535.00 |
| 2004 – 2005 | £29,036.68 |
| 2005 – 2006 | £2,423,769.00 |
| 2006 – 2007 | £4,395,729.50 |
| 2007 – 2008 | £6,079,269.33 |
| 2008 – 2009 | £55,286,643.10 |
| 2009 – 2010 | £5,673,530.00 |
Of course the one thing it is not is an open market and this year it is proving to be a very restricted market. Last year we saw an increase in the number of firms being forced, if that is the correct phrase, into the assigned risk pool. Looking at the table above you can see that in just 10 years the reserve in the ARP has grown from a figure of £150,000 to over £5.6 million. In the previous insurance year it reached an astounding £55m and the potential growth this year is not just from higher demands arising out of property markets and commercial claims but the restricted volume in the market place. You have to believe that the life of the ARP is limited and with the debate around indemnity insurance and ABS’s I would not be surprised to see changes in the near future.
We have seen insurers such as Quinn exit the market due to financial difficulties but it would appear that there are a number of others looking to either restrict their book or close it all together to certain types of business. American backed insurers are questioning the profitability in the UK market and wondering if this will be their last year and the larger players such as Zurich and Travelers, who between them hold 25% of the market measured by premium, are said to be moving away from the lower end of the market place. If this is the case and Quinn are no longer present then smaller firms of 1 to 4 partners may just find that their market place has shrunk by 35%. Add to this the losses that have been suffered in the past two years by RSA and AIG, which will surely influence their book. Consider insurers like Hiscox whose entry into the market is always late and uncertain. Then you have a distinct reduction in capacity with no real apatite to take up the slack from the remaining players. New entrants into the market are few and far between. Allianz having set their stall out last year for £10m and filling it with what they believe to be good quality risk I believe don’t have an appetite for further growth and are probably the most successful new player. Other entrants are looking to fixed and closed schemes and the enthusiasm for off shore funds has waned. There is little hope of a new large entrant.
I am sure that companies like AIG writing a £36.5m book will continue to operate in the market but premiums are bound to firm up and those with poor records or inadequate risk management systems would do well to enter the market now. Smaller firms may, again this year, find it very difficult to attract cover at the lower rates they are used to and any rise on top of the already increase prices from the 2008 market may prove to be the last straw for a number of these firms.
Open consultations
The LSB consultation process has begun and I believe it is important for the industry to be a part of this. We do actually have an appalling track record for taking part in these papers and it is to our detriment. If you flip back to your copy of the Clementi Report and look at how many solicitors are listed it is but a handful (yes I am there) but we are all quick to moan that nobody asked our opinion.
The documents are here and I think they should be serious holiday reading, yes I have a life. They may even be more interesting than the autobiography that some aged aunt bought for you.
Interesting they published these at Christmas! Or is it just me?
A TUPE Issue at the LCS
Interesting argument brewing with the government. I will let you read the attached article from The Gazette for the detail. I hesitate though to make the comment that we have seen several reincarnations of this service each time with the same staff and different leaders. Each time the service has failed. Time for a change, of staff?
Rule 9 and a change in the guidance.
I have seen this note in The Gazette recently which if you have not seen may be of interest to you practicing lawyers.
Move to scrap the assigned risk pool
The scrapping of the assigned risk pool does nothing for the debate on the Professional Indemnity Market. The fact is that the whole process is flawed.
Whilst the articles in The Gazette raise some interesting points, even some crucial ones if you believe in the need for diversity of firms in the legal market. They don’t seem to address the fact that the problems in the market are much of the professions own making. Why have we:
- A single expiry date. This means that the market is inundated with proposals at one point in the year and the insurers are able to assess the market in one easy comparison making the market into ‘one book’ at one glance.
- A complete lack of understanding amongst the majority of solicitors that you need to sell yourselves to the underwriters. The insurance market needs to know of your commitment to risk management, training and the way in which you conduct your business. If not I think they are entitled to believe that your firm is just one of many.
- Not realised that the brokerage system does not work for solicitors. There are only really a handful of good brokers in the market who have direct access. Yet solicitors continue to deal with their local broker who then has to refer it onto a market broker who then presents ‘blocks of risk’ to an underwriter. The firm then gets no personal representation and the underwriter has no choice but to write his business on a category of risk.
- Really why has the profession not realised that all of this talk of risk management which has been so prevalent over the last ten years will be ignored at a cost. The cost being increased premiums. I go to risk management conferences, have spoken at them, and every year someone stands up and says “Engagement letters are important” well if the profession has not got that message yet maybe it deserves the market that it has.
Yes the market does need looking at and I believe the assigned risk pool should be abolished but there are fundamental restructuring issues we need to deal with before we do it. If we’re going to have a free market let’s do it, but let’s make it a fair one.
Rule 9 Gets Another Bashing
The Law Society Gazette recent publish an article that informed us all that the world has gone mad.
The Law Society’s council voted to change its policy on referral fees yesterday. It adopted a motion by council member Sue Carter to alter council’s existing policy
It does not really matter if you agreed at the time or not to try now to unravel agreements with suppliers is going to be highly costly and disruptive. The rule change (to allow referral fees) has not in my opinion ever led to the client being disadvantaged in anyway and it certainly is not unprofessional. What it does give us is a level playing field upon which to compete when other bodies come into the market. If we are unable to pay fees in the event that the Law Society is successful in their efforts then can we assume that everybody will be banned from paying them? Marketing groups, insurers, banks in fact the very people who are set to enter our arena yet are unlikely to be regulated by the SRA! Yes some solicitors may not be as good at abiding by the rule as others, yes maybe it needs changing with regard to the introducers auditing provisions but we have the SRA to enforce rules and I am sure they will.
This attacks the one principle that we must have in 2011-2012: a fair market place. A level playing field where we are able to compete because if we can not there is a very strong possibility that a very large number of firms will die!
An LSB spokesman said ‘Our business plan makes clear that we are sympathetic in principle to the views of some stakeholders, including the Law Society, that there is a need for a consistent regulatory approach across the sector as regards referral fees. This is why it will be the first issue that we will ask the Legal Services Board consumer panel to advise us on.’
I hope this at least indicates that the LSB have an eye to the bigger picture.
Yes the Law Society have to convince the SRA and the LSC would have to take the same line but if this is the judgement of the councils wise and mighty should we not be worried? Maybe they should debate if the professions subscription should be stopped to them or at least voluntary as they are now a representative body, or should that be unrepresentative?
Fitness Test for New Law Firms
We are proposing the introduction of a common and consistent licensing framework for those lawyers and firms – and those who would liked to invest in legal service provision- which should promote wider choice and variety and which has robust consumer protection at its heart.
David Edmonds Chairman of the Legal Services Board (LSB)
The prospect of a test of fitness or adequacy is an obvious one and we would not have expected to see much less. What it does not seem to do is address the problems of multi regulation which may well be required. If a Barristers Chambers want to own a firm of solicitors who regulates it, the Bar Council? Or, and i can not contemplate this, both the Bar and the SRA?
Consultations great, but there needs to be guidance and this document leave a lot unanswered. It is difficult to see how you can deal with this document in isolation. Regulation of MDP’s is yet to be addressed, won’t that have a bearing on how we respond.
LSC Tendering
I have recently sent this open letter to a number of people.
Dear Sir,
I write to voice my concern over the introduction of best value tendering (BVT) for criminal legal aid contracts. In fact to be clear, my concerns are focused on the general approach of the LSC to the tendering process.
At a recent seminar held in Birmingham on 26 June Hugh Barrett from the LSC in responding to questions admitted the fact that costs savings were the main motive for BVT. This I believe is the first time that the LSC had conceded this point in discussions with practitioners. What I remain unclear about is what these cost savings actually are and how they will affect the future of this work.
I think we have to accept that all organisations are looking for cost efficiencies and I do not see why the LSC should be exempt from that process. However, cost cutting has to be undertaken with some strategic thought process and as part of that process; the question should be asked how do our suppliers, lawyers, continue to make money from providing this service on our behalf?
I see no evidence of that question being asked. The concept of BVT may raise concerns amongst some but I do not think that is the issue. The issue here is, how do we formulate our response to this tender process with the uncertainties created by the LSC? We need to be able to plan for the provision of these services for years to come not just in the short term. We can reduce our overhead and the cost of delivery if we are able to provide services, and I accept they have to be done locally over a large area if we can still leverage the savings of scale. Being asked to bid for a number of areas on a single basis and with a restriction as to the market share we can obtain precludes a model of scalability and I would therefore argue, of sustainability.
Yes we understand the need to drive down cost, we understand the political interference the LSC suffers and we do believe in the concept of access to justice. But, if we cannot make money in providing that service, how many people will be left to provide it and to what quality?
We are one of the larger suppliers in the West Midlands and are looking to expand. Should we not be encouraged to stay in this market place planning for a future rather than persuaded to focus resources elsewhere because of the uncertainty created by this tendering process?
We all have a stake in these proposals. I hope that solicitors working in the whole range of sectors unaffected by the BVT proposals will understand how important this issue is to them and offer us their support in efforts to stop the government making a major mistake that could have permanent detrimental consequences on the administration of justice.
Yours sincerely,
