In the changing legal climate, preventative legal cover could save your business from costly court actions, say Sheena MacGregor and David Vine
Since the demise of The Accident Group, the big question hanging over the legal expenses market has been, is there a future for after-the-event? Allianz Cornhill Legal Protection (ACLP) believes that while the right model and underwriting discipline are in place in this market, there is every reason to write after-the-event (ATE) business in the future.
However, the future of ATE should not distract the industry from what ACLP believes to be a longer term objective. How can legal expenses insurers and brokers tap into the unfulfilled potential of the before-the-event (BTE) market. Just over half of motor policyholders, and less than half of the industry's household customers have BTE cover. Add to this the fact that only a third of the commercial market has BTE, a picture emerges of a market that has a long way to go before it reaches its true potential. In monetary terms, this can be £3m-£5m of premium available to be written.
Historically the approach to marketing BTE cover, although affordable with a wide level of cover, has been less than dynamic. There are a number of off-the-shelf/one-size-fits-all type packages for commercial legal protection, that may or may not actually meet the specific requirements of individual policyholders.
The challenge for legal expenses insurers is to push on from this position and provide brokers with the right products to sell.
The key areas for product development are in commercial lines. There has never been a better time to explore the commercial lines sector in a more vigorous and targeted way, especially with health and safety and employment laws finding new ways for policyholders to find themselves falling foul of legislation.
The industry needs to adopt a more customer focused marketing approach that moves away from off-the-shelf to an approach that can deliver real and relevant value. This means tailor-made products that fit the customer's business, rather than fitting the customer's business into existing products.
Legal protection needs to be more than just insurance - it also needs to offer solutions for customers to drive down claims costs by providing 24/7 access to legal advice .
ACLP's 24-hour helpline offers a frontline service that is immediately accessible and provides a professional legal service from day one. Advisers offer preventative as well as curative advice.
Key issues for business customers, in particular the SME market, are the types of regulation coming in from Europe. Concerns about anti-discrimination laws and family friendly policies are seen as dangerous currents that they have to navigate alone. Customers need to be helped through these difficult waters.
As we all know, ignorance of the law is no defence, but through ignorance a business may find itself at an employment tribunal. With indications from the employment tribunal that it will be meting out costs orders more frequently in the future, the cost to businesses of being dragged through an employment tribunal is set to rise. The cost is not merely monetary. A business's good name and reputation is priceless.
Time is not cheap for any business. Delivering fast and effective dispute resolutions is one of ACLP's core aims.
Alternative dispute resolution (ADR) before a qualified mediator has been lauded over the past few years as the way forward. It has become a familiar and trusted forum in the field of construction and commercial litigation. One of its chief advantages is speed and enabling disputes to be resolved months or even years before they might have been resolved through the courts. The saving of costs is also important for those without legal expenses insurance. Individuals, however, remain wary of ADR. The man in the street often sees mediation as privatisation of the legal system and the mediator and his/her decision as not having the same status as a judge and a court judgment.
However, with mediation now a feature of some BTE policies, more and more individuals are being introduced to this forum and are reporting satisfaction with it. A national clinical negligence pilot mediation scheme Resolve concluded last year with promising results. Many clinical negligence lawyers see it being just a matter of time before mediation is imposed in this area of law.
Insurers and lawyers alike have welcomed the Civil Justice Council's announcement in last month that the long running dispute over the size of success fees in road traffic accidents funded by conditional fee agreements, is nearly over. Success fees in such cases will be 12.5% of base costs in the vast majority of successful claims, or 100% for the very few that go to trial.
While both sides would have liked different percentages applied, both recognise the advantage of certainty in this area. In addition to the underwriting advantages, the courts that have been bogged down hearing disputes solely on the level of success fees, are now freed up to hear other cases more quickly. What effect will this have on ADR? Will those commercial businesses who have opted for ADR return to the court system if the court system is speeded up? Probably not, but ACLP will be watching this space.
Best practice for legal expenses insurers is to closely monitor their market, work together with brokers and customers and react swiftly in these ever-changing times. Today, more than ever, preventative advice is needed by commerce and individuals alike. By providing preventative legal advice ACLP can help them all save time, money and face.
