Putting the record straight on Legal Expenses Insurance

14 May 2015

Lesley Attu, Head of Product DevelopmentIt's difficult to know where to start to unravel the myths and prejudice that are portrayed in Jessica Brown's article "Does £25 a year really get you 'your own lawyer’?" which the Telegraph published on May 7th

However, as an award- winning legal expenses insurance provider, we would like to try to provide  a more accurate impression of our products.

The stated objective of the article is to expose what the writer refers to as "loopholes and exclusions", the effect of which is to leave readers with an unbalanced and negative view of legal expenses insurance (LEI) without understanding its advantages. It is disappointing that the writer appears not to have even read a legal expenses policy herself and has largely based her understanding on hearsay without giving consideration to the detriment experienced by those who become involved in a legal dispute and who do not have a LEI policy to claim against.

The value of products does not solely rest on the sum of legal costs individuals can claim for but on the opportunity the insurance provides to obtain fair damages and compensation or to obtain other legal remedy where legal rights have been breached.

Policy cover
The account of what legal expenses policies typically cover is muddled. In the main the writer focuses on Family Legal Protection, although the quote at the end of the piece from "Go-compare" refers to motor uninsured loss recovery which is a different product that is sold with motor insurance rather than home insurance. While we agree that the quality and scope of coverage varies depending on the provider, policies give consumers the confidence to protect their legal rights arising from a number of areas of dispute. The article fails to mention significant additional services such as telephone legal and tax advice helplines and access to websites that allow customers to download legal documents – such as a free will. These services can benefit policyholders who don't need to claim and their value inevitably exceeds the typical £25 premium.

Costly legal environment
Savage cuts to legal aid that were introduced in the Legal Aid, Punishment and Sentencing of Offenders Act, recent significant increases to court fees and changes to rules on recoverability of success fees and After-the-Event insurance premiums make Before-the-Event LEI better value than ever before. Insured claimants will not lose a chunk of their damages in order to pay their solicitors' fees - which would otherwise be the case and neither are they obliged to take out expensive loans to fund disbursements such as medical reports for personal injury claims, or employment tribunal fees which may be up to £1,200.

The use of panel law firms
The various law firms' comments which are quoted in the article are motivated by their own self-interest since these firms have not been selected to sit on LEI panels. All legal expenses insurers throughout Europe comply with legislation which allows a claimant to choose their own solicitor when proceedings need to be issued. The law may not work well for non- panel law firms, however it gives rights to both policyholders and insurers and protects policyholders from the effect of significantly higher premiums that would be needed to insure the risk were non-panel firms able to insist on charging insurers exorbitant levels of fees.

LEI panel solicitors are selected for their expertise in matters covered by policies and their service levels are monitored and audited. The Financial Ombudsman Service (FOS) and courts acknowledge that individuals who appoint a panel solicitor firm do not suffer detriment and there is no empirical evidence to support the allegation that panel-solicitor cases result in poorer-than-average outcomes. The FOS gives further detail about the use of panel solicitors in its technical note.
We refute Mr Peter's assertion that LEI providers employ unqualified staff to handle claims.

Regarding complaints to the FOS about legal expenses insurance – of course every single complaint is one too many – whether or not it is justified. We would put the figure quoted into context by clarifying that complaints about legal expenses (upheld or not) made up just 0.17% of complaints reviewed by the FOS in the April 2013/14.

Prospects of success
The requirement that claims should have a 51% or greater prospect of success is no different from the merits test that is applied to state funding for legal aid. It is not in a litigant's best interest to pursue or defend a case that they are unlikely to win and the courts take a very dim view of spurious, unreasonable, disproportionate or vexatious litigation. Again the FOS has some further notes about this on their website. They point out that cases can only be assessed on the information available to the insurer at the time and some cases will be likely to fail due to lack of evidence, legal obstacles or because there is no known cause of action.

Similarly, we find it nothing short of bizarre that Ms. Ford comments "So if a 'reasonable’ settlement is offered, insurers will often threaten to withdraw people’s cover if they do not accept it". Surely to refuse a reasonable offer is both ill-advised and not in keeping with the spirit of the Civil Procedure Rules, so why would anybody criticise a policy encouraging the acceptance of reasonable offers?

Solicitors who act under no-win, no-fee agreements set the bar higher than the 51% chance of success insisted on by legal expenses providers. It is disingenuous to imply that solicitors take on cases without reasonable prospects of success when acting under no-win, no-fee agreements as such a tactic would result in commercial suicide.  Those who do so when engaged on an hourly rate are raising false expectations while lining their own pockets and should be challenged. Solicitors have a duty of care and must act in the client's best interest when advising on merits and the value of a claim. Where policyholders disagree with an opinion LEI policies will often provide for further advice to be sought.

Method of sale
The Financial Conduct Authority (FCA) is currently consulting about how add-on insurance products should be sold. We share their view that a greater customer awareness of products which allows informed customer decisions at the point of sale is to be strived for. We do not allow our distributors to offer ARAG products by opting-out. Since the FCA's 2013 Thematic Review of Motor Legal.

Lesley Attu, Head of Product Development

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