On 1st October 2023, the SRA officially took over the management of the Solicitors Indemnity Fund (SIF). This follows agreement by the SRA’s board in February 2023 to bring the SIF under their control. The fund provides protection to legal service consumers who may have suffered losses when using legal services provided by regulated law firms. Regulated law firms are covered by compulsory insurance against claims while they practise and for 6 years after they stop trading (‘post-six-year run-off cover’ (PSYROC). The scheme is available to claimants once the PSYROC comes to an end and covers claims made by consumers during or those that relate to, the period of time when a law firm was covered by the SIF ‘master policy’. The continuation of the SIF under the oversight of the SRA will provide much-needed reassurance within the sector in relation to post-six-year negligence claims. The SRA’s Chief Executive, Paul Philip, has stated, “The SRA-run scheme will provide assurance for all that there is ongoing protection for clients. We can also make sure it runs as efficiently and effectively as possible”.
Efficiency And Cost Benefits
By taking on the SIF and adding the oversight and governance of the post-six-year protection scheme as part of its regulatory arrangements, the SRA expects to reduce the overall cost of running the scheme. According to the SRA, “The change will also lead to a reduction in the scheme’s running costs, compared to the previous arrangements, meaning more money will be available for the fund’s core purpose of settling claims”.
In October 2022, the SRA said it believed that by taking over the SIF, it could achieve cost savings in the region of £500,000. Analysis by Willis Towers Watson (WTW) published by the SRA in September 2022 showed that the potential claims handling cost savings of the SRA running the SIF are between £300,000 and £400,000, and there is an additional potential infrastructure savings of upwards of £120,000.
New Insurer Appointed
The SRA has instructed ‘Polo Works’, a London-based insurance services provider, to provide cover for the SIF. The arrangement between the SRA and Polo Works will last for 18 months and will cover both existing and new claims. The SRA has said that Polo Works will work closely with the SIF panel firms to deal with open claims and ensure a smooth handover and continuity of service.
Announcing the arrangement between the SRA and Polo Works, Paul Philip said, “We said we would be engaging external experts to help us further develop and then deliver the day-to-day operation of the scheme, and I’m delighted to welcome Polo on board. They have excellent claims handling expertise and are already familiar with our systems. We look forward to working with them”.
A new claim form and supporting information are now available for SIF claimants.
SIF Rule Changes
In February 2023, the SRA agreed on the final rules for the SIF scheme. This included two changes which were made to the draft rules recommended by the Law Society. The first change ensures that if there is a dispute over whether a claim is within the scope of the indemnity scheme and is referred to a sole arbitrator, the SRA will now invite an independent body to make the appointment (rather than choosing this themselves). This may, for example, be the Chartered Institute of Arbitrators or Centre for Effective Dispute Resolution. While the appointment of a sole arbitrator is an “unlikely event”, in the words of the Law Society, it provides greater reassurance that any appointment of an arbitrator will be fair.
The other suggestion that was made by the Law Society and which was agreed by the SRA, is that if SIF is wound up at some point in the future, and the SRA has no further indemnification purpose for the residual funds, any remaining money would return to the Law Society, to be used for the benefit of the profession.
Lubna Shuja, the President of the Law Society, has welcomed the SRA’s adoption of the SIF and the way that the SRA has accepted their recommendations; “This is the culmination of a collaborative effort from a range of stakeholders who proved the profession as a whole wanted to retain the SIF. We acknowledge the way the SRA listened to the concerns expressed by the Law Society and consumer groups and responded responsibly. We have been greatly impressed by the huge amount of work undertaken by the SRA staff to bring the SIF under the regulator’s direct management in time for the start of October. We look forward to continuing to work constructively with the SRA on this important consumer and solicitor protection, long into the future.”
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