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While we await further updates as the MOJ works to finalise the supporting rules and pre-action protocol, there are steps that brokers should be taking now, to ensure that they are ready for May.
Only a small percentage of road traffic accident (RTA) claims fall within the current Small Claims Court limit of £1,000. However, after May as much as a predicted 97% of claims will fall within the new limit of £5,000, which will require solicitors to use the LEI policy to fund their costs, rather than relying on costs recoverable from the liable insurer. As a result, there will be a significant increase in claims costs under the policy, which will inevitably change the commercial dynamics of the product.
Brokers should always check the policy terms and conditions and beware of premium rates which can often miss out sections of cover, leaving customers less well protected. We’ve observed an unfortunate development in the market where some have chosen to remove cover for Small Claims Court cases – therefore leaving the product with little value.
Nothing in life is free and subsidised models, by their nature, are generating revenue from somewhere in the supply chain.
Where legal services and LEI are offered as a combined proposition, blurring between the lines of insurance and legal services can be used as a tool to mask a legal service provider’s uncompetitive fee structure.
We therefore see much greater value in separating the purchase of LEI from the procurement of claims services. Independence of the LEI product from the legal services, or accident management provider, enables independent assessment of the market and full transparency of the costs and revenues entrenched in the whole supply chain.
The challenge for us, as well as brokers, therefore, is to demonstrate great value for money to the end-customers, ensuring they know how important LEI can be. We believe the reforms present an opportunity to provide a Motor Legal Expenses product that can demonstrate high levels of customer value. We’re ready for the change and have spent the last few years developing new models that will give customers greater value, a digital customer journey and additional services that go beyond litigation.
As we approach May, we urge brokers to ask themselves the following important questions when considering a new LEI provider:
At this stage I would speculate that further delays are unlikely, so by acting now, brokers can ensure the best possible protection for their customers.
For further information, please contact Richard Finan, Director of Strategic Development, on 0344 7701072, or email [email protected].