Indemnity Insurance And The Regulatory Revolution

The SRA Handbook came into force on 6 October 2011, introducing a new Code of Conduct that was in part prompted by the advent of alternative business structures, and the desire of the SRA to open up the legal market in the wider public interest. That drive to keep pace with the changing consumption of legal services will, with effect from 25 November 2019, give rise to the new and more streamlined SRA 'Standards and Regulations', and the creation of two codes of conduct for firms and solicitors.

The latest reforms followed the SRA's March 2018 consultation paper which proposed significant revisions to the Minimum Terms & Conditions ("MTCs"), to include dramatically reducing the minimum limit of indemnity, as well as an overhaul of the operation of the Compensation Fund. Amidst much opposition, in late 2018 the SRA decided to park the issue of changes to PII cover, but to focus on plans to liberalise the market, and effectively to change the way that solicitors are regulated.

The aims of the SRA as part of its 'Looking to the Future' programme are to focus upon what is deemed most important; maintaining high professional standards (and the protection of client money) and making it easier to both access legal services and for firms and solicitors to perform those functions. A major part of this involves the rise of the 'freelance solicitor' and the ability for 'non-reserved' legal work to be conducted from outside regulated firms.

According to SRA statistics, almost one quarter of firms are sole practitioners. Balanced with the pressures of ensuring there is a sufficient work stream, it can provide greater flexibility to fit around changing lifestyles and, ultimately, more control. The scope to be able to provide reserved legal activities as a freelance solicitor is an extension of this, without needing to be a formally recognised sole practitioner and with a reduced regulatory burden.

To be 'freelance', the SRA's 'Authorisation of Individuals Regulations' sets out a series of preconditions. The solicitor will be more than three years qualified, self-employed and practising in their own name rather than through a trading name or company. They will be instructed directly by their clients, and be paid directly for the services. They will not employ anybody and not be able to hold client money (other than for disbursements which have not yet been paid).

However, it then becomes far more vague around the professional indemnity insurance...