Legal expenses insurers warn ATE premiums could rise twelve-fold
Liability insurers have rejected demands to pay the higher legal expenses premiums that will follow from the government’s proposed reform of personal injury claims.
Legal expenses insurers have warned that after-the-event (ATE) premiums could rise by as much as twelve times and that the market could collapse as a result.
Tony Baker, director of the Legal Expenses Insurance Group, said that insurers must agree not to contest the higher ATE premiums.
He told delegates at the Insurance Times Future of Personal Injury Claims conference: “Claims reform will bring in a period of great uncertainty unless there’s a guarantee that the level of premiums will be fully recoverable.”
At present, defendant insurers contest ATE premiums, which currently stand at an average of £900. The claims consultation paper stipulates that ATE premiums will only be recoverable if liability is denied, which legal expenses insurers claim will eliminate the better risks from the market.
But insurers said they would not guarantee paying the higher premiums.
David Williams, claims director at AXA, said: “There’s no way we’re going to give them carte blanche. In the past, an obscene amount of profit has been made.”
He added: “It is about time that the ATE market moved to something that is more responsive to risk. The process clarifies the risk, which clarifies the justification for higher premiums. If premiums are reasonable, we will pay them.”
With the deadline for responses to the paper expiring on Friday, ATE insurers remain hopeful the issue will be revisited.
“There is a likelihood that the Ministry of Justice (MoJ) – and the new secretary of state, Jack Straw – will rethink and decide this is not the time to tinker with or
revolutionise the claims process,” Baker added.
He called for a pilot scheme to test the viability of the proposed reforms.
The ABI maintains that while some ATE?insurers will be forced to leave the market due to the reforms, others will enter.
But Phil Bellamy, operations manager at DAS Legal Expenses, warned: “The MoJ proposals work on the basis that an ATE market will exist. I have no doubt that a significant proportion of it won’t be able to secure any business.”
He added that no new underwriters had entered the market in the previous five years.
Baker also warned that insurer uncertainty regarding the proposed deadlines for the admission of liability was a matter of urgent attention.
“It will be a mockery if that is not bolted down and severe sanctions put in place and if there is no agreement on a timescale being extended,” he said.