Failure to take out legal expenses cover could limit legitimate legal claims

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Policyholders of motor and home insurance are rejecting legal expenses insurance as an option when purchasing policies through price comparison sites, DAS has warned

It said almost all policies sold via aggregators have the option of including before the event (BTE) legal expenses cover, but customers were not selecting the insurance in order to lower the cost of their premium.

The legal expenses insurer said customers were typically faced with up to 11 add-on products on aggregator websites but because they were often focused on price first there was a “growing trend” to purchase on price alone and ignore legal cover.

It added the trend would result in a significant percentage of policyholders no longer having access to justice as they would not be able to afford the costs of pursuing a claim on their own.

The “price drive nature” of purchasers on aggregators had already contributed to a decrease in legal expenses insurance take-up in recent years. Legal expense cover on motor insurance policies currently stands at an estimated take up rate of about 50%, according to DAS, down from 80% a few years ago, and family legal expenses has fallen from take-up rate of 70%, to an estimated 40%.

DAS predicted fewer people would be able to pursue legal action once the Jackson reforms to legal aid are introduced in April, which it said will restrict after the event insurance sales and limit legal aid to all but the most serious cases.

DAS head of sales Lyndon Willshire said: “The introduction of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 in 2013 will see a significant reduction in people’s ability to obtain access to justice.

“However, BTE retailers can play a significant role in minimising the effect of this legislation, as there is an opportunity for them to ensure that their customers are protected from the effects that these legal changes will have. This is essential as the government recognises and champions the fact that BTE legal expenses cover will play a pivotal role in today’s society.”