In the first of a series of articles on legal expenses Ray Kneeshaw explains the types of policy and what they cover.

Using this CPD pageFor the vast majority of practitioners and indeed support and supervisory staff in our industry, CPD is about regular learning and study that is planned, recorded, timed and evaluated. If you are a member of a professional body with a CPD requirement then there will be certain rules regarding the quality and nature of study material, and the way in which it is recorded.For staff of GISC members this means recording on your individual training file what the learning was, who provided it and when.It might be structured, such as a course, a learning programme or exam study. But it can be unstructured. This form of study encompasses reading the trade press, technical material or taking part in activities to support your professional body. Some CPD requirements are points related (a little antiquated) and others require a time value to be allocated. For example, it might take one hour to read Insurance Times each week. Most of that could be put as a time value but, in reality, perhaps only an half hour was devoted to learning something. The rule is to be honest with yourself and record the time that is relevant. Always take time to make a note of what you felt you gained from the activity. This is useful information for anyone else considering the same activity.In response to the popularity of our CPD programme each week's CPD page can now be downloaded from our website.Legal expenses insurance has been available for a little over 30 years, since repeal of a 900-year old statute. This was originally designed to prevent hiring of a champion to fight for one party in trial by combat.The modern version of this is legal expenses insurance. The repeal was in 1967 and the first recognisable legal protection policies appeared around 1973.Cover is provided for individuals or companies and pays the cost of pursuing – in some cases defending – the policyholder's rights. In practice, the policyholder agrees the claim is made on its behalf and does not see any of the bills. Either the legal protection company itself, or its appointed solicitor, handles the claim. The basic policy types are:

  • Personal, covering householders for consumer disputes and personal injury
  • Motor, to recover uninsured losses arising from motor accidents
  • Commercial, protecting businesses for employment problems and disputes over health & safety or taxation.
  • A distinction is normally made between motor and non-motor claims, though personal injuries arising from motor accidents may also be covered under personal policies.Numerous variations on basic policy types are available as well as spin-off services and options.The original German model involved selling individual policies direct to the customer. In the UK, personal legal protection is almost always sold as an add-on to household or motor insurance, through a scheme, or offered as a benefit. Commercial legal protection may be sold individually or on a scheme basis. Schemes substantially reduce the cost of cover.An intermediary is almost always involved in the sale, though this may be a bank or other corporate body, as well as a broker.Benefiting from economies of scale, most individuals are protected through low-cost add-ons attached to traditional insurance taken out for an event or events that have yet to occur. This is before-the-event insurance.After-the-event cover is also available for a specific individual following a specific incident. Cover is generally more restricted, more costly, and effected with a solicitor rather than a broker. Brokers are, however, eligible to sell after-the-event cover.Brokers typically arrange a personal lines scheme to add legal protection to car or household policies. This may be on a mandatory or opt-in basis. Ticking a box to opt out is likely to be prohibited under new guidelines.Some insurers already offer legal protection with the principal motor or domestic policy. To avoid conflicts of interest, legal protection claims must be handled independently of the host policy.Commercial lines cover is increasingly sold on a scheme basis. Brokers may package individual policies with other business covers, often through an online link with the legal expenses insurer, or through a quote engine provided by the main software houses.Uninsured loss recovery provided the boom in uptake for brokers because it enabled them to outsource claims administration and at the same time generate new commissions. Around a third of all drivers are covered and their uninsured losses might include:
  • Motor policy excess
  • Loss-of-use compensation or reasonable hire charges
  • Personal injury compensation
  • Repair costs for those without comprehensive cover
  • Compensation for damage to clothes or personal belongings.Personal legal protection usually covers all household members. More than half the UK population now has such cover. Potential legal disputes covered include:
  • Goods and services such as retail purchases and holidays
  • Employment
  • Personal injury
  • Personal taxation
  • Neighbours, where physical boundaries or property are involved.
  • Additionally, a range of complementary helplines are usually supplied, including:
  • Legal advice
  • Tax advice
  • Personal counselling
  • Health and personal fitness
  • Emergency domestic assistance, childcare, vet finding.
  • Commercial legal protection includes helplines to guide employers and may include risk assessment before commencement of cover. It is typically defensive in its core cover, with options available to pursue contract disputes or debt recovery.Most business problems centre on staff issues and tax. Standard cover generally includes:
  • Employment matters
  • Tax investigations (VAT, Inland Revenue, PAYE)
  • Prosecution defence
  • Property disputes
  • Loss of licence.
  • Other policy types are:
  • Motorcycle
  • Yachts and leisure craft
  • Property rental
  • Loss of driving licence
  • Insured domestic emergency
  • Motor breakdown
  • Employment practices protection/liability comprehensive employment cover for businesses.
  • Intense price competition means that even core policies may have cover stripped away. Situations to watch out for are:
  • Territorial limits, eg UK-only prosecution defence
  • Limits of indemnity
  • Prospects of success
  • Non-insured products
  • Restriction to policyholder-only, rather than family, passengers or employees
  • Accidents that are not road traffic related
  • Claims against the Motor Insurers' Bureau
  • Full cover applies only if helplines are used
  • Waiting periods during first year of cover.
  • Typical exclusions are:
  • Events occurring prior to inception
  • Fees incurred without authorisation
  • Claims with poor prospects of success
  • Use of own solicitor before proceedings issued.
  • Traditional add-on insurance may become less common as insurers make their own arrangements to incorporate legal protection within core policies.After-the-event cover is growing in popularity, though at a less rapid pace than predicted, and with spectacular collapses by some large providers. It will continue to grow, expanding into the commercial arena.Before-the-event policies cover far more for far less premium, offering vital protection in such areas as medical negligence.To retain motor clients, brokers are likely to add more value to packages by including wider cover incorporating roadside assistance, replacement vehicle and driving licence protection.
  • Ray Kneeshaw is sales and marketing manager at DAS Legal Expenses Insurance
  • This page is edited by RW Associates, specialist in training, compliance and competence. Email: ruy.lopez@brokercompliance.co.uk