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Forging ahead to meet customers’ ever-changing needs The ancillary market has traditionally lagged behind...
Legal expenses insurance is often overlooked by consumers at the time they require it, but, as Rebecca Conway, Arc Legal, explained to Modern Claims, its profile could be raised with the implementation of reforms to personal injury.
Arc Legal Assistance are a leading provider of Legal Expenses Insurance and assistance services in the UK and Republic of Ireland, managing in the region of 15m Legal Expenses Insurance policies. Working with insurers, intermediaries, financial institutions and affinity groups, Arc Legal’s focus is upon delivering ‘best in market’ bespoke solutions. As a qualified lawyer, Rebecca has worked both in private practice and within a number of legal expenses insurance organisations. Rebecca began her career at Arc Legal as Claims Manager and was one of the five original members of the business, working alongside the founding directors from 2005. Since then, she has played a pivotal role in shaping and delivering Arc’s claims function and is now Head of Claims and Operations. Her responsibilities include the management of Arc Legal’s claims team, auditing of partner solicitors and implementation and overview of claims operations.
How will legal expenses insurance (LEI) evolve following the introduction of personal injury reforms?
Increasing the small claims track limit to £5,000 will mean that solicitors’ costs will no longer be recoverable from the opponent. Therefore, LEI will have even greater relevance to customers, as the policy will now pay these costs, ensuring that customers receive 100% of their damages. This will create greater focus on the claims process, with solicitors efficiency being driven by the LEI providers or alternative servicing models considered to limit the premium impact to customers arising from these additional claim costs. This is particularly relevant with the new tariff of compensation to be introduced for whiplash claims, as the costs of bringing those claims must be proportionate to the potential compensation available to the claimant. There will no longer be a ‘one size fits all’ approach to legal expenses and the focus will be on ensuring that the product remains relevant and continues to deliver value.
What effect will a tariff system for personal injury compensation have on LEI?
The tariff system will put a cap on the compensation available to claimants, and therefore any costs incurred under an LEI policy to bring about those claims must be proportionate to the level of compensation available. We are working with our legal partners to create new servicing models, which will make this achievable. For straight forward, low value claims, greater automation and elements of self-servicing need to be given significant consideration to achieve proportionality of costs.
How does LEI differ in the UK from other countries, and are there areas of the UK LEI market that can be improved by adopting practices from other countries?
The key difference between the UK and the rest of Europe is that most continental countries offer standalone products, making them much more expensive. The UK has adopted a lower cost, add-on structure. For example, in Germany, purchasing LEI is seen to be as important as home and car insurance, whereby the UK market considers LEI as a secondary purchase. This has been largely driven by the difference in the cost recovery position.
Is there enough knowledge about LEI among consumers, and what can be done to create more awareness?
Many customers are unaware that they have LEI, so we need to highlight this and explain its benefits, encouraging them to call the legal helpline and giving them access to a law firm that could help. The legal helpline is important as it is the first point of contact for the customer seeking support or information about their issue. The Financial Conduct Authority (FCA) have released a number of reviews relating to general insurance products. We support their move to improve consumers’ understanding and confidence in LEI products, and we actively work with all our partners to provide product and sales training. This is to make sure the customer understands the extent of the coverage, its benefits and any exclusions in the product.
“For straight forward, low value claims, greater automation and elements of self-servicing need to be given significant consideration to achieve proportionality of costs”
What are some of the biggest challenges currently facing Arc Legal as LEI brokers, and how is it meeting these?
The sector has experienced a number of changes in the past few years. While others who have relied on generating income from claims have faced challenges to their business models, our position of only ever earning income through the premiums we charge has enabled us to concentrate on continuing to develop our products and services in the best interests of our partners’ customers. We therefore view any change as an opportunity, rather than a threat.
“In Germany, purchasing LEI is seen to be as important as home and car insurance, whereby the UK market considers LEI as a secondary purchase”
What benefits or pitfalls does bundling LEI insurance present to both LEI providers and consumers?
Unbreakable ‘add on bundles’ are not permitted under FCA rules, however, including LEI within the underlying motor or home insurance policy, for example, will enhance the value of that product. However, the difficulty with embedded cover is the
lack of customer awareness of the product; the customer may not know that they have LEI as they have not opted in, and usage
could therefore be lower. This does depend on the sales method for the underlying policy. If the customer was made aware of the full extent of the policy, they will have a better understanding of its benefits and will be more likely to use it. We continuously work with our partners to increase customer product awareness and utilisation.
Why do you believe some consumers choose not to purchase LEI, and what could be done to incentivise more people to purchase it?
A lack of product understanding means that many consumers think LEI only covers personal injury. We therefore need to increase awareness of the product features and highlight successful claims examples to reinforce its full coverage. The impact of personal recommendations may have a role to play as consumers will look to the advice of a trusted friend or family member.
What additional benefits does LEI provide to those consumers who ultimately don’t claim on it?
Alongside legal services, customers also have 24/7 access to a legal helpline; providing advice on a range of personal and
business matters. We also have a range of other helplines available, such as a Debt Counselling helpline, Domestic helpline, Lifestyle Counselling helpline and Health and Medical Information Service. We can also provide customers with an online legal document service that gives them 24/7 access to useful forms and templates that they can draft themselves; along with online guidance that may allow them to settle their own disputes prior to needing a lawyer.
How do the needs of commercial LEI customers differ to private policyholders, and how will these needs change in the future?
Commercial customers are usually more aware of the consequences of litigation, and therefore the benefits of LEI. The consequences of litigation on a business can be catastrophic and carry higher costs, so the need for LEI is paramount. Commercial LEI is available for sole traders, right through to large corporations. This range of customers means that their needs will vary. A sole trader or small partnership will not have the resources of a large corporation, i.e. no dedicated HR or legal department. LEI can offer a “lifeline” to a small commercial enterprise, providing them with access to a helpline and online documents. Commercial LEI often provides cover that would only be required by businesses rather than an individual, e.g. cover for defending a health and safety prosecution or tax investigation and cover for directors. However, we do see a crossover in the needs of commercial and personal customers, for example in our Cyber Support offering. We currently provide a Cyber Support product for SMEs, providing 24/7 assistance to help them survive a cyber-attack and loss of personal information. Since launching the product, we have received enough client feedback to lead us to develop a new personal cyber product, aimed at individuals rather than businesses. This product is still in development but we are looking to launch within Q2 of 2017.
“There will no longer be a ‘one size fits all’ approach to legal expenses and the focus will be on ensuring that the product remains relevant and continues to deliver value”
How else do you predict LEI will change in the future?
The PI reforms and restriction on the ability to recover costs from the defendant will mean that LEI should gain prominence as a means of accessing justice. The LEI products on offer in the market will also need to adapt to the current reforms. Following the FCA thematic reviews, greater focus will be placed in increasing cover and product value, rather than price.
This piece was originally published in Modern Claims Magazine’s Legal Consumer Supplement.