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When it comes to legal expenses insurance After The Event (ATE) insurance isn’t going anywhere, but there will be increasing opportunities for brokers offering Before The Event (BTE) insurance in the provision of access to justice. This is as a result of legislation changes impacting on the ability for ATE insurance to assist low value injury cases.
Why am I telling you about this?
Here at Temple Legal Protection we have been involved in both types of cover for over 20 years. In our experience, many businesses and individuals outside of this area of insurance could well be unaware of the impending impact on their ability to acquire ATE insurance or its costs. By sharing this information with you, it gives you an opportunity to help and educate your customers – plus a very good reason to offer them BTE insurance.
In the beginning, legal expenses insurance was actually prohibited…
…Businesses and individuals in the UK would have to either self-fund the cost of defending or pursuing a legal action, though some individual were able to obtain legal aid assistance.
As the population became more aware of their rights and their ability to pursue these, the trend towards a more litigious society started. This growing demand for legal advice and assistance saw the introduction of Before The Event (BTE) LEI in the mid 1970’s, with several LEI companies joining the market. By the 1990’s it was estimated that 1 in 10 businesses had LEI cover, and LEI for individuals was offered to motorists, bank account holders, membership organisations, as a staff benefit and as add-on to a household policy.
The increase in availability of these policies lead, not unsurprisingly, to an increase in legal actions, legal costs and the legal aid bill. As a result, in 1999 the Access to Justice Act was introduced, which paved the way for Conditional Fee Agreements (no win no fee) and After The Event (ATE) insurance to cover the costs of pursuing a legal action should a case lose.
In the years that followed LEI became commonplace. More than ever, individuals were able to pursue their legal rights and seek justice and compensation. The impact on liability insurers and the NHS of the increased costs of defending injury-related claims was widely reported, with many calls for the government to address this issue.
2013 saw a major change to the legal system with the introduction of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 following the review and recommendations of Lord Justice Jackson. The Act included a ban on referral fees, the introduction of one-way costs shifting (with the claimant not liable for costs if they lose) plus a cap on success fees and who pays them. The combined effect had a considerable impact, in particular on injury-related cases.
Today, solicitors can still offer no win, no fee agreements with ATE insurance. Excluding clinical negligence, defamation/privacy and mesothelioma cases, the cost of the insurance premium and success fee (charged to offset the cases that lose, usually 25%) is now passed on to the law firm’s successful client – not the losing opponent.
The restrictions introduced has impacted the market, with fewer law firms offering no win no fee agreements. Further, with the costs of the case now deducted from the claimant’s compensation, clients without insurance are put off starting it in the first place. In addition, other legislation has changed, increasing the minimum value of cases that must now be processed through the fixed fee small claims court.
Looking forward, will we see customers finding it harder to instruct a solicitor to help them with lower value injury cases? This may well be the case, especially with the minimum limits expected to rise for cases proceeding through the fixed fee small claims court. To survive, law firms may have to focus on the higher value and more profitable, larger cases.
But where will this leave people who don’t fall into this category – how will they gain access to justice?
BTE insurance could well provide the answer, and an opportunity for intermediaries.
With a more educated population that remains increasingly litigious and a growing gap in the market not covered by ATE insurance, BTE insurance is more relevant than ever.
Whether as a personal lines add-on, commercial policy or as part of a group scheme, we are at a potential tipping point where customers will be asking for BTE insurance, and expecting their insurance intermediaries to be able to provide this. The Intermediary who pre-empts this demand to meet future needs for their customers, will be best prepared for a changing market.
The key? A legal expenses insurance provider who can offer both ATE insurance for injury, clinical negligence and commercial ATE areas as well as BTE insurance cover. A provider well placed to grow in this ever-changing market of ongoing economic, legislative and political uncertainty – resulting in more litigation and individuals ready to sue a company…
…all making the need greater than ever for top quality insurance – backed by a legal advice helpline accessible 24 hours a day.
To find out how Temple Legal Protection’s legal expenses insurance products can help you to retain and gain more customers as well as extend or compliment your range of service offerings please call me on 01483 514429, email or visit our website.
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Sean Fayle
Senior Underwriting Manager
Sean Fayle
Sean started his insurance career in 1994 and has been specifically involved in Legal Expenses since 1997. Over a long career specialising in legal expenses, he has worked as an underwriter, sales executive and relationship manager.
His experience of underwriting a variety of commercial and personal, stand alone and schemes accounts means that our customers have the benefit of his broad knowledge.
As a relationship manager, Sean has a strong focus on customer service and a desire to get the best outcomes for our clients and works closely with our business partners to achieve this.
Sean’s extensive knowledge of the legal expenses market helps to support Temple Legal Protection as a market leader for BTE & ATE insurance.
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