Insurers have criticised the Solicitors Regulation Authority for being too slow to act when law firms breach the rules.

Speaking at the Law Society Property Section’s annual conference in London last week, Andrew Nickels, risk manager at Zurich Professional, claimed the SRA fails to take action when firms do not pay their insurance premiums.

‘We provide cover in October, firms default by December and we report them to the SRA, which does nothing,’ he said.

Nickels said the insurer would not reinsure the defaulting firms, which would then end up in the assigned risks pool and be allowed to practise for another year without paying for insurance.

‘If firms don’t pay their premiums, they should not be permitted to continue in practice,’ he said.

Nickels said insurers and the public need to be able to rely on the SRA to act swiftly, but this was not the case at present.

He gave an example of a solicitor insured by Zurich whose Alzheimer’s disease deteriorated rapidly, to the extent that he had difficulty locating his own office.

‘We reported this to the SRA and a month later nothing had been done and the SRA had not even visited his firm,’ said Nickels.

Richard Collins, head of standards at the SRA, agreed that firms that did not pay their premiums should not be able to continue in practice, but said it was ‘very difficult’ to shut law firms down.

He said case law had developed to the extent that non-payment of insurance premiums did not permit the SRA to intervene to shut down a firm.

‘The public protection provided by the ARP is deemed to be so protective that the public are not at risk by [non-payment of premiums],’ he said.

At a separate conference for insurers hosted by insurance firm Greenwoods last week, Matthew Young, policy adviser for the Association of British Insurers, speculated that some insurers were thinking of pulling out of the solicitors’ PII market.

He said there was mistrust and anger at regulators following the SRA’s decision earlier this year to retain the ARP until October 2013.

‘The question that people often ask me is why they stay in a market which has been such a bloody mess for a while,’ said Young.

‘It’s a triumph of hope over experience… We’re looking at a 2011/12 with virtually no change.

'If you’re an insurer looking at that market you’ll think, "what am I doing here if nothing has improved?" There must be a temptation for some to get out and come back when we’ve got a few changes.’

But Law Society head of regulation Elliott Vigar said he was confident there would not be an exodus of firms from the PII market.

He said: ‘There is always an undertone to this conversation, asking if the fact that the market has not got anything it wanted means insurers will up sticks.

'Equally, for as long as I have been involved in this area, that threat has been present.

‘Insurers would have to consider, if they were thinking of dipping out and in, whether they could regain the market share they once had – loyalty may switch to other insurers.

‘I think new insurers will enter the market this year and next.’