ATE policy sales surged ahead of last year’s legal cost reforms

A last minute surge in people taking out policies to cover no win no fee cases before fee reforms kicked in helped legal expenses insurer DAS to grow its premium income 10% to £199.6m last year.

“Most legal protection insurers were expecting a dip in top line results because of the impact of from the Legal Aid Sentencing and Punishment of Offenders Act (Laspo) on after the event (ATE) business. That didn’t happen because there was a huge big rush,” chief executive Paul Asplin told Insurance Times.

In fact, DAS’ premium from ATE policies was up 45% on 2012.

The surge meant that ATE policies accounted for 35% of DAS’ turnover in 2013, compared with 25% in 2012.

Total turnover from premium and other income was up from £179.9m in 2012.

LASPO changed no-win no-fee deals for personal injury cases by requiring success fees to be paid by the claimant from the damages they are awarded instead of the defending insurer.

It also made ATE policies less attractive to personal injury claimants. The policies had been taken out to protect claimants against insurers coming after them for legal costs if they lost a case, and could be charged to insurer if they won the case.

But a new cost regime, known as QOCS (qualified one way cost shifting) limited the costs a claimant might have to pay an insurer if they lost.

However Asplin predicted that ATE premiums would continue to account for a quarter of DAS’ total business.

To achieve this, it is countering the post-LASPO drop in personal ATE policy sales by developing more commercial policies to cover legal costs for commercial or civil litigation.

It is also selling more clinical negligence policies, which see cover arranged by a solicitor on behalf of the client bringing the negligence claims, where fees can still be recovered.

Asplin said DAS was also selling more before-the-event legal expenses policies and insured assistance products such as home emergency or motor breakdown.

DAS’ pre-tax profits increased from £6.1m to £9.2m last year, buoyed the acquisition of personal injury specialist law firm CW Law a year ago, and relaunched it as DAS law.

DAS recommends claimants process their claim with DAS Law, which brings down its costs, while the firm also picks up business from consumers unable to claim on their policy who decide to bring a case anyway.

Its COR improved from 98.6% to 95.5% after DAS increased rates on some classes of business it lost money on, including some parts of home emergency cover.  It made a £5.4m underwriting profit, compared to £1.6m in 2012.