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Looking at the throng of runners and riders gathering at the starting line for the chance to be one of the first alternative business structures (ABS) in England and Wales, there amongst the crowd, is a legal expenses provider or two.
A number of players in this sector have indicated their intention to participate, and if the rumours are true, some are already well on the way with their plans. But, the very concept of a legal expenses provider holding a direct interest in a law firm raises a fundamental issue of conflict.
A legal expenses insurer adopting an in-house legal services model – the lawyers directly employed by the company – runs the risk of creating a commercial conflict of interest and could open itself up to allegations from consumers that its legal decisions lack impartiality.
The potential conflict of interest arises at the point when the initial case is assessed for prospects of success and, also when decisions are made on how far to take a case. There is a strong possibility that in-house legal teams will be perceived as having the underwriters’ exposure rather than client interests at heart.
In April this year, Consumer Focus published ‘In Case of Emergency’, its report on the before the event legal expense market. While it highlighted the potential for the sector to play a bigger role in widening access to justice, it also raised concerns over in-house legal case assessments. It focused on the lack of independence that existed, particularly at the point when initial decisions are being made on the merits of the individual case. The use of in-house lawyers in assessments raises very valid issues and consumers must be protected from the commercial pressures such a structure would create.
To ensure the sector as a whole is not tarnished by these kinds of allegations, providers need to consider how they will clearly demonstrate a level of independence in the decision making process. Transparency in the ABS relationship between the insurer and law firm will be crucial to give consumers confidence that there is integrity in the system and, in the legal expenses product itself.