Blog: The opportunity for legal expenses insurance in a post-reform world

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The Civil Liability Act has created some unintended circumstances and Minster Law's CEO Shirley Woolham asks how legal expenses insurance can help in the post-reform world.

The government’s Civil Liability Act has created a world of pain for stakeholders, with unintended consequences from the reforms surfacing by the week. Most recently, the Association of Consumer Support Organisations discovered that the Act has inadvertently denied at least 50,000 injured children and protected parties access to justice. We await the Ministry of Justice’s response with interest.

Providing injured people with a fast and efficient path to gaining redress is a worthy objective. Civil justice needs a kick into the 21st Century, and it makes sense to harness technology if we can improve the customer claims journey.

While, rightly, much of the debate has centred on the new Litigant in Person portal, the legal expenses market is also going through preparation for significant change.

Previously, experts such as Lord Justice Jackson have hailed legal expenses insurance as enabling customers to continue to access legal help in the post-reform world. In its response to the Jackson report, the government said it “would welcome a change in culture so that there is a greater use of existing before-the-event policies and the development of the market to expand BTE insurance coverage”.

The government believes 50% of motorists have a before-the-event LEI product, but public trust in the insurance industry has fallen markedly in recent months and consumer understanding of the cover remains a challenge. So, if LEI is going to fulfil its true potential in a post-reform world, providers and distributors, regulators and government all need to work hard to better inform the customer and give them confidence that they will be covered by their policy if they require legal support for their claim.

Already journalists in the national and trade press are scrutinising the product. One journalist found several motor legal expenses policies where the small print excludes paying out for lawyers’ costs incurred in the small claims court. And a motoring organisation said it had spotted legal expenses insurance providers changing new policies to remove this cover.

This is hardly an approach with which the industry can foster greater consumer confidence and trust and speaks more to the lack of a more sophisticated rating approach, rather than any focus on what the customer needs.

Having successfully lobbied for reforms, the industry and LEI providers in general can’t simply shoot the messenger. Instead we need some fresh thinking and better collaboration between the legal and insurance sectors if LEI is to step up to the challenges of the post-reform world.

Personal injury and low cost, small claims processing expertise can bring new impetus to the LEI market. Inbuilt pricing and risk assessment advantages can attract insurers and brokers seeking stable pricing and capacity providers seeking profitable underwriting.

With the support of customer-centric insurers and broker partners, along with government and regulatory support to raise public awareness, I’m buoyant about the future of the sector and its ability to ensure customers can be fully protected in the post-reform world.

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