One of the most talked about proposals from the SRA's new “Looking to the Future” initiative –is the choice of new models of practice, with sole solicitors, (coined as “freelance solicitors”) no longer having to be authorised or regulated and will be able to deliver legal services directly to the public.
When these reforms come in on 25th November of this year, a freelance solicitor will be able to provide reserved and non-reserved legal advice to the public without the requirement to register as an SRA recognised sole practitioner. In addition to this, there will no longer be a requirement to hold minimum terms and conditions professional indemnity insurance (MTC PII) cover. Within in the freelancer proposal, there is no duty for freelance solicitors who provide unreserved legal activities to have any PII cover in place, while freelance solicitors providing reserved activities must take out 'adequate and appropriate' cover.
Why are they creating such reforms?
The SRA's objective of the “Looking to the Future” programme is to encourage growth within in legal services, siting that only 1 in 10 people who require legal advice actually seek out legal advice. The SRA believe that by reducing the regulatory framework in which solicitors must operate in, costs will be lower, increasing their ability to practice on a freelance basis. , This in turn will lead to the public being able to access more cost-effective legal services.
In principle, these reforms should provide a wider choice to the public however, the practicalities of these reforms have been questioned by a number of organisations, perhaps the most vocal being The Law Society. The Law Society have voiced major concern with what, so far are very vague guidelines as to what should be considered 'appropriate and adequate' insurance and how clients of freelancers with no insurance can access the compensation fund.
'Adequate and appropriate' insurance
The SRA have yet to publish what they define as 'adequate and appropriate' which has led many to argue that the proposal will actually be detrimental to the client's experience rather than beneficial. The fear is that clients will be confused about what the limited insurance cover will actually protect them against and the new 'adequate and appropriate' cover could significantly lower consumer protection. This in turn would threaten public trust in legal services and expose clients to losses that will not be insured. Sarah Chambers of the Legal Services Consumer Panel writes in her open letter to the LSB, (who backed the SRA's freelancer proposal) that “consumers have very little awareness of the difference between regulated and unregulated providers, let alone the varying protections that come with different service providers.” You can read the full letter here.
Access to the Compensation Fund
Within the proposal, the SRA have said that clients of freelance solicitors who undertake reserved work will be able to access the SRA's Compensation Fund in the event of lost money due to the freelance solicitor's dishonesty or failure to account for money they have received. However, civil liabilities will not be covered by the Compensation Fund. Clients of freelance solicitors who undertake unreserved work will not have access to the Compensation Fund at all and this must be made clear to consumers before any work is undertaken. One major concern that needs to be addressed is that the SRA has no data on how such claims are likely to affect the fund.
Restrictions of Freelancers
Although there are question marks around whether public trust of the legal profession could be damaged by introducing freelance solicitors who have no or minimal insurance, the SRA have sought to protect consumers somewhat by imposing tight restrictions on freelancers. Under the new proposal, freelancers must:
- Have a minimum of three years PQE
- Hold no client monies – (the use of third-party accounts is expected)
- Not employ anyone else in connection with the services they provide
- Trade in their own name
Although this new legal solution seeks to broaden the range in which solicitors can practice and indeed the way consumers use legal services, these restrictions should be carefully considered as it lays out a narrow way in which a freelancer can practice and solicitors must ask themselves whether making the decision to become a freelancer is the best one in the long run given that there is a lack of clarity.
'Consumer confusion' is a key consideration when looking at this proposal, however some consumers may not know the difference in offerings. There will be clients who are very much aware of their rights as a client of an SRA regulated practice and how they can make a claim against their solicitor should they be unhappy. Although this proposal seeks to create more choice for solicitors in the way they practice, clients may be deterred by their solicitors not having comprehensive insurance cover in place.
It seems that although the freelancer proposal intends to aid the diversification of law services and benefit both the public and solicitors who wish to have less onerous regulation - at this current stage the SRA have created more questions than answers.
Until the SRA produce their definition of 'adequate and appropriate' insurance it is difficult for us to say what we believe will be the most appropriate action to take. We are keeping our finger on the pulse and ensuring that we are prepared for the next stages. Should you have any questions on the contents of this article, please do not hesitate to contact your Lockton representative or myself directly and either of us will be very happy to assist you.