ULR providers have already been greatly affected by the Dimond vs Lovell case. But, says Alison Boyle, there is more change in store with the implementation of after the event insurance and conditional fee agreements.
In the past year it was rare to hear about the Uninsured Loss Recovery (ULR) sector except in reference to the landmark Dimond vs Lovell case, where the House of Lords held that "extra charges" imposed by credit hire companies could not be recovered from an at-fault driver's insurance.
According to the Insurance Times ULR Survey, the vast majority of providers claim the ramifications of this case have been the biggest thing to affect the sector in the past two years.
Now topping the list of new threats are after the event (ATE) insurance and conditional fee agreements, which providers say are likely to have a huge impact in coming years.
The Access to Justice Act (1999) now requires lawyers to check whether cover is in place before entering into an ATE arrangement, but the main problem is that most motorists have no idea whether their car insurance includes ULR - which makes drivers eligible for legal protection in the event of injury arising from a motor accident.
Two court cases - Sarwar vs Alam and Callery vs Gray - have further emphasised the need for solicitors to check whether ULR cover is in force, but there still exists a lot of uncertainly about the ATE market and the impact on pre-paid ULR.
A number of ULR companies surveyed are also concerned about the General Insurance Standards Council (GISC). This is due to the lack of clarification on how the GISC will affect ULR companies.
As a result, the Motoring Uninsured Loss Recoveries Association (Mulra) is to hold a series of meeting on the subject with the GISC sub group, which was set up to look at how far organisations contracted to ULR companies should fall into the orbit of the GISC.
The sub group has been welcomed by GISC head of policy Angela Darling, who said it "was keen to talk to all those involved in this market to discuss issues of particular concern".
Mulra is also currently seeking a dialogue with the Financial Services Ombudsman to discuss the issue of independent legal advice.
The Ombudsman highlighted cases where he believed claimants should be allowed to use the first solicitor they consult, rather than one chosen for them later from an insurer's panel
In doing so, he admitted that this was contrary both to policy wordings and interpretation of regulations over the past decade.
The Insurance Companies' (Legal Expenses Insurance) Regulations 1990 allow choice to be exercised at the time administrative or legal proceedings are commenced, not from inception.
Concerns for ULR providers
This view and recent judgments on the issue, according to Mulra, are of vital concern to ULR providers and could have a major bearing on the entire ULR market.
The fear is that personal injury lawyers who are not on insurers' panels are encouraging claimants to go to the Ombudsman in order to keep a case. The problem arises when a client approaches a law firm directly - often in response to high profile advertising - without realising their ULR cover already enables them to pursue a claim. Mulra says the only people to benefit from complete freedom of choice are greedy professional indemnity lawyers.
Mulra chairman David Haynes said: "We are concerned over the apparent change of stance on this important issue.
"The right to select your own solicitor has superficial attractions. However, this freedom is misunderstood and we believe the Ombudsman is perpetuating the myth of its desirability in recent rulings. Claimants have far more to lose than to gain, third-party insurers face higher claims and premiums would have to rise to allow for inefficient and expensive lawyers.
"All panel lawyers are closely scrutinised. They are engaged for their experience in specific areas, being expert at winning cases and securing the best possible awards for damages. Their use of technology and other efficiencies also help control their costs. It's a win-win situation for all concerned."