Legal expense insurers have reason to cheer
Following the long-awaited draft release of the Ministry of Justice’s claims consultation paper in April, you could have been forgiven for thinking that the after the event (ATE) insurance market was on the verge of extinction.
The paper, which stipulates that ATE premiums will only be recoverable if liability is denied, resulted in legal expense insurers demanding guarantees that defendant insurers would pay their vastly inflated premiums in full.
With the better risks being removed from their market the only alternative, they argued, would be withdrawal – to the detriment of claimants.
Six months on, there is no legislation in sight, and ATE insurers are breathing a sigh of relief, and growing their business.
Indeed, one year on from the Rogers v Merthyr Tydfil test case, in which the Court of Appeal upheld the DAS 80e staged premium model, defendant insurers are playing ball, or as one commentator would have it, “declaring an armistice”.
And though the war is far from over, it is encouraging to find ATE insurers praising defendant insurers for settling cases pre-issue. Figures from DAS show that the rate has risen from two thirds to three quarters of claims. Though there will (and indeed must) always be disputes, this figure will continue to rise.
Part of this increase is due to the fact that insurers are already gearing up for the reforms, however distant they may be. Insurers’ claims handling capabilities are under ever-increasing scrutiny, and steps must be taken to generate efficiencies – regardless of the compensatory model that is applied.
And though uncertainty over a number of issues – most notably fixed costs – persists, there can be no doubt that the removal of unnecessary waste is of benefit to ATE provider, defendant insurer and claimant alike.
As one claimant solicitor concludes: “The first thing insurers’ solicitors now think about is settlement. They want these cases off their books as soon as possible. There is no point in them incurring a large ATE premium if they can avoid it."
Phil Bellamy, operations manager at DAS adds: "Insurers are paying up. They don't need to pick up the phone.
"But, in the end, there is nothing more we can do until the MoJ makes its move."