But warns funding issues could affect legal expenses market
DAS has welcomed an independent report on the before-the-event (BTE) legal expense insurance market commissioned by the Ministry of Justice.
The legal expenses insurer said it particularly welcomed the government's endorsement of the role BTE played in delivering access to justice.
However, DAS said the report was overshadowed by the MoJ's ongoing consultation paper into the BTE and ATE markets because of the funding issues that it raises.
"Legal protection has to be looked at in its entirety before specific changes are introduced", said Lyndon Willshire, DAS UK sales manager.
"While it is encouraging that the importance of BTE cover is clearly recognised by legislators, we are concerned that proposed changes in the ATE sector would have a negative impact across both sectors, particularly in respect to affordability and ease of access to justice".
He added: "BTE cover remains the most efficient and equitable way of providing the majority of people with the broadest path to justice. However, there will always be a minority of people who don't have BTE cover and a minority of claims that fall outside the scope of a BTE policy. A healthy and competitive ATE sector is essential if such cases are to enjoy the same level of access to justice".
DAS made the following comments on the report's key findings:
* While awareness of BTE policies has historically been low, even among policyholders, it is clearly growing with a wider increase in awareness of legal rights. This is supported by rises in claims numbers and advice helpline calls.
* Increasing awareness will inevitably have a corresponding impact on premiums, because current underwriting profits (as distinct from the retail profit suggested in the report) are marginal. Nonetheless, DAS supports the report's recommendation that industry bodies such as the FSA and ABI should take a lead in increasing public understanding and awareness of BTE products.
* It would be a mistake to think that awareness will be increased through point of sale literature. A growing majority of sales are transacted remotely and already burden policyholders with far more literature than most admit they will ever read.
* DAS agrees that families on lower incomes and those in rented accommodation are less likely to have appropriate cover and that their needs might be better met if employers or housing associations provided policies for them.
* The report recognises that referral fees subsidise the current pricing models. While eradicating such fees may be preferable, it would also be inflationary. Coupled with increasing awareness, BTE premiums would inevitably approach European levels.
* The increasingly exercised right of policyholders to appoint lawyers outside a BTE insurer panel is also inflating premiums, as well as adversely affecting the defendant insurer costs, duration and quality of service in many claims. The enhanced 'benefit' that freedom of choice offers should be recognised by allowing BTE insurers to offer products that limit choice, if the future of low premium BTE cover is to be sustainable.
* DAS supports the recommendation that simpler product names could assist understanding of LEI cover and has used the report's suggested alternative, "legal protection" extensively, for many years.
