Insurers should make their peace with the forthcoming legislation and use it to their advantage
Some insurers may be concerned about the implications of the Legal Services Act 2007 (which is nicknamed Tesco Law), but its influence in the industry continues to grow.
Legal expenses insurance provider Abbey Protection is among the first companies to be granted an alternative business structures (ABS) licence under the 2007 act and is thought to be the first company in the insurance industry to obtain one.The licence will take effect from 1 January.
The act allows non-lawyers to own law firms and to employ lawyers who offer legal services directly to customers.
Abbey Protection is likely to be making a follow-up announcement early in the new year. The company has been chomping at the bit to offer legal services. Abbey managing director Chris Ward told Insurance Times more than a year ago that the company was considering buying a law firm.
Companies that expect to take a hit from the Legal Aid, Sentencing and Punishment of Offenders Act 2012 when it comes into force in July, might be able to rely on Tesco Law.
Several more insurance industry participants are expected to follow Abbey’s lead. Outsourcing firm Quindell Portfolio is acquiring personal injury claims firm Pinto Potts, and Direct Line Group revealed in its listing documentation that it was considering applying for an ABS licence.
The trend has its detractors, who feel that insurers and others will try and replace personal injury referral fees, which will be banned under the 2012 Act, by earning personal injury legal fees – thus perpetuating one of the problems the 2012 Act aims to solve.
While this is a risk, there are many positives in Tesco Law for insurers. A fresh source of revenue is not to be sniffed at in today’s difficult times. Besides, there’s no stopping it now.
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