The Legal Services Board (LSB) has published the findings of its thematic review of restrictions on choice of insurer including the independent advice from the Regulatory Policy Institute (RPI).

Professional Indemnity Insurance (PII) is an important but costly part of doing business for regulated legal practitioners, who have expressed concerns about that cost in previous LSB research. How PII is supplied – and any regulatory restrictions on practitioners’ choice of PII supplier – are likely to have implications for practitioners, consumers and approved regulators (ARs).

The review highlights questions that ARs can reasonably be expected to ask themselves in order to develop the best regulatory response on choice of insurer. Key points in our report and in RPI’s advice are:

• PII is costly and can affect decisions about entry to the legal services market, mobility and innovation in the market, and exit from it
• Historic regulatory restraints on practitioners’ choice of PII provider are being removed with fewer regulatory limits on who can provide PII
• Commercial insurers appear to view their target market as legal services practitioners generally, rather than as separate markets for solicitors, conveyancers, barristers etc.
• To be effective, ARs need to understand the PII market as it can affect competition between legal services practitioners and have implications for the protection of consumers.

Neil Buckley, Chief Executive of the Legal Services Board said:

“PII is important – it protects consumers’ and practitioners’ interests and builds public confidence in buying legal services. This review recognises that to remain fit for purpose, ARs’ requirements in relation to PII need to take account of ongoing developments in the legal sector and in PII markets.

Various arguments have been made in favour of different models for delivering PII, such as an open market, the use of a master policy or the creation of a mutual fund. With this review we are not looking to specify the ‘right’ answer for any regulator. Instead this review seeks to provide the basis and tools for ARs to make evidence-based decisions in this area that reflect their duties under the Legal Services Act.

The need for regulatory intervention in any area should be considered from first principles. Existing obligations also need to be reviewed periodically with a view to justifying continued intervention. We encourage the ARs to make use of this report and RPI’s advice in carrying out this important assessment on restrictions on choice of insurer.”