Legal eagle

To say Paul Asplin is a prominent force in the legal expenses market could be seen as an understatement.

He has been chief executive officer of DAS UK for a decade; helped introduce the concept of uninsured loss recovery to the wider market; and has been at the forefront of discussions surrounding various legislative programmes, such as the Ministry of Justice review and the current Jackson consultation.

Mr Asplin started at DAS in 1977 as an underwriting assistant in Bristol. He has since worked all over the country representing DAS in the South-west, London and the North, before returning and settling in his home town of Bristol in 1988.

However, his experiences are not confined to the UK.

As well as running one of the largest domestic legal expenses insurance providers, Mr Asplin became the first UK member of the international association of legal expenses insurers" known as RIAD" to be appointed its vice-president, and he has been earmarked for the president's role before the end of the year, thus reflecting the growing influence of the UK LEI market within Europe.

"RIAD has predominately been a European story up until now," says Mr Asplin. "It has been dominated by European members, but that is starting to change."

International player

The association has members from every country in Europe where LEI is transacted, and now also includes members from further afield including South Africa and Canada. There is even a current application pending for membership from Paraguay.

Mr Asplin explains DAS UK is now becoming more of an international player and he wants to take advantage of being part of this international organisation. "A huge part of what RIAD does is to lobby and influence the policy makers but we are also focused on what is best for the consumer. We can learn plenty from the overseas markets," he says, citing the homeland of DAS UK's parent as an example of one of the biggest LEI markets.

"In terms of the level of coverage that you see in the more mature markets like Germany, it is much wider than here. The way in which people buy their legal expenses is totally different" the concept of the 'add on,' or a throw away extra that you tag on the back of a household product is not common practice anywhere outside the UK and Ireland.

"It's clear that selling LEI as a separate policy is much better for the consumer in terms of 'treating customers fairly'. With add-ons, you have a business model that relies on the fact that people don't know they have the cover," continues Mr Asplin.

"That is not sustainable in the long term, and we as an industry need to move to a position where people have the cover and know why they have it. That's what you have in Germany and all through continental Europe."

Mr Asplin is confident that this will change over time. "We are coming up with new ideas for cover, service and the way claims are covered," he promises.

Despite his role as RIAD vice president taking up a significant proportion of his time, Mr Asplin still has ambitious and wide reaching plans for the DAS brand itself in the UK.

"We have significantly diversified already," he states. "We trade under four different brands; they all have their place and their niche and we are happy with that. The DAS brand itself within the insurance community has an incredibly strong and respected identity, but that is not the case with the general public.

"Therefore, attaching our brand to different types of products when addressing the broker market is an attractive proposition for us."

Mr Asplin explains that the insurer's traditional before-the-event core legal expenses business used to be 100% of what DAS did, but today that figure is 60% because it has branched out into other areas such as after-the-event insurance and legal services.

And there are other opportunities on the horizon. The impending changes set to take effect under the Legal Services Act" or 'Tesco Law' as it has been dubbed" will allow non-lawyers to own law firms, and offers DAS new avenues for revenue and growth.

Dogged determination

So far, Mr Asplin explains that DAS is as far down the road as the law allows them to be, without physically owning its own firm of solicitors.

"We are determined to start licensing our alternative business structures" by the end of 2011 there will be a law firm called DAS Law and we will own it." He says that the benefits of this opportunity will resonate across the industry.

"We will see more capital coming into that sector, lots of new ideas around marketing and the delivery of legal services, and more legal services being commoditised."

He is crystal clear on the reason why this is a positive move for the industry" for both the legal and general financial services sector. "The point is to increase choice for consumers and make it easier and cheaper to get access to the law. Of course, not all law firms think this is a great idea because their monopoly will be broken, but personally I think it is the correct thing to do.

"Opportunities will present themselves through the web. People will be able to access a whole range of legal documents over the internet and tailor them" for example, complete a will online," he maintains.

Meanwhile, on the theme of diversifying, Mr Asplin hints that DAS could possibly look into other types of insurance that are related to the legal sector, but do not fall under the LEI banner.

"The jury is out on that one but we are actively thinking about it," he says. However, one certainty for DAS lies in its desire to export the brand internationally.

It is in the process of opening a subsidiary in Canada, which" according to Mr Asplin" will "open doors" elsewhere and be principally managed by the UK team.

"We have the credibility of our backer, Munich Re, which is seen as a solid professional player and that helps greatly," he says. "We are looking at one other overseas opportunity, but that is a bit sensitive at the moment. However, we are not busy fools, we are still focused on making a profit and growing the business here."

That was evidenced by DAS' recent decision to boost its London office. Last month it expanded and relocated its London base to accommodate a dedicated City underwriting team. This saw DAS leaving its office in St Helen's Place, where it had been for more than 15 years, and move to larger premises on Lombard Street.

"The London market is an area where we have under performed historically," admits Mr Asplin. "We are not there to compete with the likes of Brit, but we recognised there are opportunities and have strengthened our sales team there as a response. Part of our plan is to improve connections with the London market so that we are well-placed to look to the future."

Busy times

So, busy times for DAS" while it is poised to diversify and export its brand internationally, it is also faced with wide competition that is, to say the least, fragmented.

"There are plenty of players in the LEI market," concedes Mr Asplin. "But it's interesting that people get the wrong impression. For example, the current Jackson Review makes a comment that there are 47 insurers in the ATE market, which makes the classic mistake of mixing up insurers and intermediary firms."

He claims that there are actually very few "serious" players in that particular sector. "I predict some of those will fail because they are too small, while some of the more serious firms could possibly come up for sale soon" particularly those that are owned by banks or venture capital firms."

For DAS, he says, the strategy has always been to look at all acquisition opportunities, and that this has been done on a regular basis over the last few years. For example, in January 2007 it concluded a deal for legal underwriting agency, Amicus Legal and its subsidiary companies. Then, in May 2008, it finalised the acquisition of the ATE expenses insurance business of Litigation Protection, Law Assist.

Nevertheless, according to Mr Asplin, there are currently no targets in the market that he views with any particular interest, although he accepts deals will be done. Whether this actually sees the sector shrink in number is still open to debate though.

"Despite the consolidation that will inevitably happen, there will still be new players that pop up because the barrier to entry is quite low. But we need to shake out in the LEI sector, it can't carry on as it is because there are far too many people in it," he maintains.

As of today, Mr Asplin believes DAS has a reasonable standing in the LEI market. "We are number one in BTE insurance and that is where we want to be in ATE. Currently, our ATE business is growing 50% year-on-year and if that continues as expected, we will have a strong market position."

However, this is where Mr Asplin begins to get irritated with what he calls the "constant review and threat of interference in the legal system" that has plagued the LEI sector since he took up his current role.

"There has been one review after another looking at all sorts of things that impact on ATE" court limits, recoverability of ATE premiums, conditional fee agreements" it has been constant," he sighs.

Until recently, the MoJ appeared to take the stance that the current market should be maintained and left as it is.

"We've had to take some major legal actions into court to establish the principles of recoverability of premium, and have been successful in winning all of those," claims Mr Asplin. "Then, out of the blue, we get the Jackson review, which once again looks at everything that had just been looked at in the MoJ report. That was a little annoying," he admits, although he does say that DAS will participate in the review" even if he describes the first draft as "wrong".

By way of background, Lord Justice Jackson has been tasked with conducting a review of the costs of civil litigation and the issues raised could have serious implications for the LEI market" especially CFAs. Among the areas that could potentially be impacted are whether or not contingency fees will be introduced instead, and also the question of so called 'cost-shifting'.

Mr Asplin turns his attention to cost-shifting first, and explains that the English cost rule states that the loser of a claim will pay the winners' fees as well as their own.

That has been enshrined in common law and it works well, he says. "Jackson has suggested that we introduce one way cost-shifting in the UK, which basically means if you lost a claim the insurer would not be able to recover their cost from the claimant. Under that circumstance a claimant would not need to arrange ATE cover," he clarifies.

Big risk

Mr Asplin maintains that in reality, this represents a big risk for the market. "If we were to effectively introduce the US system of cost shifting, you then get a legal environment where you get nuisance claims. The US legal system encourages spurious litigation" it is important that costs should be left alone because the system we have seems to be the best in the world."

Moving on to the issue of contingency fees, Mr Asplin is just as determined in his views that they should not replace CFAs" and calls the premise "nonsense". He says what the review neglects to understand is that under a contingency fee the claimant would lose a percentage of their damages, but under a CFA, they would not lose anything.

"When Lord Jackson talks about the legal fees being disproportionate to the damages, he may be right but the reason for that is that the damages are too low in England," asserts Mr Asplin. "If the damages were the same level as Canada for example, the legal fees in this country would not look out of kilter. At some point people will wake up to the point that the English claimant is being under-settled."

As to where the LEI market may turn next, Mr Asplin hints at future opportunities in the aggregator market, but maintains that the biggest change will be around the ownership of law firms" bringing the legal and insurance sectors under one roof for the first time" and says it is a development DAS has its hopes pinned on.

In the meantime DAS is focused on boosting its international presence, developing more products in both the LEI market and outside and exploring other opportunities to increase its brand awareness. So, busy times for DAS Legal Expenses" or should that be DAS Law, or DAS International? Within the next few years, we will surely find out.