Government picks up on proposals, but legal expenses insurers sceptical

The government hopes to drive the growth of before-the-event (BTE) insurance in the UK following the launch of a consultation taking forward key reforms outlined by the Jackson Review.

The Ministry of Defence consultation paper, Reform of civil litigation funding and costs in England and Wales, proposes scrapping recoverability of after-the-event (ATE) insurance premiums and success fees in so-called ‘no win, no fee’ agreements. The government believes this will create more opportunities for BTE insurers.

Justice minister Jonathan Djanogly said the government wanted to help the BTE market develop in the UK as an alternative to ATE insurance, which he said had helped fuel the compensation culture.

According to the consultation paper, while 22.7 million adults in the UK have BTE insurance, many consumers who purchase it are not aware of the coverage it provides and may not make use of it.

Beachcroft head of strategic litigation Andrew Parker said the government’s proposals created opportunities for legal expenses insurers. “While the removal of ATE insurance is a problem for some, there is now room for the growth of BTE insurance.”

QBE head of strategic claims management Mike Noonan said consumers needed to be encouraged to take up BTE insurance as a standalone product.

“The insurance industry is very keen on making BTE insurance more accessible, in line with other countries such as Germany, where there is culture of people buying the product. The trouble is that there is not a similar culture in the UK. It tends to be a bolt-on to motor and household products.”

However, DAS head of legal services Kathryn Mortimer said that in Germany, where BTE is sold as a standalone policy, the cost of the product is five times that of the equivalent UK premium. “It is very unlikely that the majority of the public would purchase this insurance, given that many do not even consider it necessary when it is offered at a relatively modest price.”