Greater Consumer Awareness Needed on Professional Indemnity

New research commissioned by the Legal Services Board (LSB) highlights the need to ensure legal services consumers understand the arrangements in place to protect them in the event of professional negligence.

Legal services providers are required to take out Professional Indemnity Insurance (PII) to ensure consumers are protected from harm should something go wrong, causing the consumer to suffer financial loss. However, most consumers are unaware of this. The research found that most people assume protection is simply part-and-parcel of the service/system. Nevertheless, once informed about the arrangements, consumers welcome the knowledge that PII exists to protect them and lawyers.

The oversight regulator commissioned the research amid concern about the increasing costs of consumer protection. Premiums are increasing, and fewer insurers offer this protection as they look to more profitable sectors.

The research also asked respondents for their thoughts on the hypothetical idea of introducing consumer choice into the PII landscape in legal services:

  • The idea of giving consumers complete choice and control over PII was least popular. This is mainly because it would leave those on low incomes, those who may not understand the risks and those who are most vulnerable, less likely to be protected. This was seen as unfair and unsafe.
  • There was support for the idea of ongoing mandatory protection as long as it was at a lower and cheaper level, with the opportunity given to consumers to add to this basic level of protection if they so desire.

The research also found that most consumers prefer that lawyers, mandated by regulators, should remain responsible for PII.

The LSB is reviewing financial protection arrangements to ensure that an appropriate level of protection exists for consumers and the cost to the profession is sustainable and affordable in the long term.

The LSB plans to conduct econometric analysis and further research to develop a policy framework for regulators to use to:

  • carefully consider whether to make changes to their existing PII and compensation schemes arrangements
  • start to address the root cause of the risks in the legal sector, which may be leading to higher costs.

The LSB is also inviting stakeholders to share their views on the purpose and scope of the project.

Matthew Hill, Chief Executive of the Legal Services Board, said:

‘Ensuring consumers are protected when things go wrong is vital to building and maintaining trust in legal services. However, the increasing costs of PII threaten the viability of the current system of financial protections. If this trend continues, it could increase costs for consumers and reduce the number of lawyers operating in the market. We have also heard concerns about a more cautious approach by insurers towards innovative activities. A cost-effective system is essential to promoting access to justice and ensuring the sector can innovate.

‘We must strike the right balance between an appropriate level of financial protection for consumers and ensuring the costs to the profession and consumers are affordable and sustainable in the long term. It is important that any future model is designed with consumers at the heart and that people who need legal services understand all the options available to them.’

 

About alastair walker 10175 Articles
20 years experience as a journalist and magazine editor. I'm your contact for press releases, events, news and commercial opportunities at Insurance-Edge.Net

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