Brokers slam claim as 'self serving' and 'nonsensical'

The insurance industry has rounded on the Legal Expenses Insurance Group (LEIG), which this week claimed that raising the small claims limit would cost brokers up to £70m a year in lost commissions.

Brokers, trade bodies and legal expenses providers slammed the LEIG's claims as "self-serving nonsense" and "scare mongering".

The LEIG, a representative body for some legal expenses insurers, including DAS Legal Expenses, has claimed that an increase in the small claims limit would force up legal expenses premiums, hitting brokers commissions as the market contracted as result.

The ABI is lobbying hard to have the small claims limit raised from £1,000 to £5,000. The move would mean that 90% of road traffic accident claims could be pushed through the small claims court, and litigation could be avoided.

"We have undertaken some simple calculations and we consider that the additional pure claim cost per policy would increase by a few hundred percent," says Tony Baker, director of the LEIG.

"The average gross premium is currently £20/£25 so, even if intermediaries took no extra remuneration then the premium, with IPT, would need to double."

He continued: "Would many policyholders, especially motorists, decide it was not then worthwhile having this policy? We suspect there would be big drop in the number of policies sold."

But brokers and legal expenses providers derided the argument as unfounded.

John Mullen, chief executive of Composite Legal Expenses, said: "This is just a scare tactic. [An increase in the small claims limit] won't make much difference."

Grant Ellis, chief executive of Broker Network, blasted the LEIG. He said: "I think these figures need to have more scrutiny, because this is just scare mongering.

Peter Staddon, Biba's head of technical services, said: "What it will mean is that lawyers will lose money and that's tough."

Landmark ruling
The Court of Appeal handed down a landmark ruling that will safeguard DAS Legal Expenses' business model.

The case Rogers vs Merthyr Tydfil Council put the spotlight on the staged premium model where insurer fix fees through three stages of the legal process: pre-issue, post-issue and trial.

There were concerns that the court would order the ATE arm of DAS, 80e, which supplied the premium, to change its business model to make costs proportionate to the level of compensation.