DAS, the Munich Re-owned legal expenses insurer, has launched a blistering attack on brokers and intermediaries who feed claims to claims assessors, often when there is a pre-paid uninsured loss recovery policy in force.
DAS managing director Paul Asplin told Insurance Times: “The cowboy credit insurers and loss assessors in the ULR market are appealing to the greed of the broker by offering them £150 a time for pushing cases their way. They'll give them £500 for three cases at a time.
“A number of brokers and intermediaries are responding by creaming off straightforward cases for financial reward, against the best interests of their clients.”
Asplin said that brokers and intermediaries who operate this way open themselves up to professional negligence claims. “Brokers that sell a pre-paid policy and then sell-on their claims for some financial inducement are professionally liable to their clients.
“If passing on a claim, they should at that moment explain to their clients why they are doing so. For if the client does not achieve a good outcome, they will have a prima facie case for professional negligence against their adviser.”
Asplin's comments came as he urged the Lord Chancellor to widen the terms of his current enquiry into claims assessors in order to take in the entire ULR industry. In addition, Asplin also called for statutory regulation of the sector. He said: “With the Legal Recovery Group having just gone into administrative receivership and Direct Legal Advisers being wound up by the DTI, there is a pressing need to examine the work of both personal injury claims assessors and those ULR service providers who operate in a similar way.”
Asplin is to present a dossier to the Lord Chancellor's Department outlining abuses in the system. As well as pointing out the downside for claimants who wrongly believe their case is being handled on a no-risk basis, Asplin will draw the Lord Chancellor's attention to what he claims are “hidden excesses imposed by ULR firms underwriters”.
Asplin believes the practice of brokers and ULR firms concealing excesses from their customers is widespread. “Where such excesses are imposed, they often amount to up to £5,000, which excludes from cover most of the cases under the care of the assessor or ULR firm.
“Brokers need to have made every effort to ensure there are no hidden excesses,” he said. “And it is not sufficient to rely on policy wordings to reveal this – although by law this is where they should be declared. Brokers should check the contract with the underwriters. Failure to do so could again make the professional adviser liable to their client.”
The case for ULR regulation
Direct Legal Advisers was served with a winding-up petition by the Government in March this year.
It had been charging clients 50% of any payments received, plus other fees and costs.
Between July and October 1998, over £100,000 was awarded by tribunals to its clients, but:
- 56% of clients received nothing
- 14% received less than ten per cent
- and only 12% received more than 40% of the amount awarded to them.
Between January and October that year, over 100 complaints were made by clients who felt the company's charges were not explained properly to them.