4 min read: ‘ARC ANGLE’: FEBRUARY 2024
A roundup of the latest news, legal updates, and industry trends from Arc Legal...
The Arc team regularly provides media comment on relevant issues. Below is from an article published in the insurance trade publication, Post Magazine, on The Legal Services Act.
While the Legal Services Act allows greater flexibility for non-legal firms to get involved with selling legal services, it remains uncharted water for companies keen to expand into new areas. Alwynne Gwilt reports on the latest developments and potential risks
With the appointment of the Legal Services Board last month, it appears the government remains on track to deregulate the industry as planned under the Legal Services Act 2007, which came into force last October. The Act will eventually allow legal firms to partner with companies in the insurance, accountancy and finance worlds – among others – through alternative business structures.
This offers the opportunity for big-brand legal products to emerge – picture Tesco-Law or M&S will-writing services – which could potentially dominate the market, widen consumer access to legal services and provide a new income stream for insurers and solicitors alike. It is, in many senses, a new legal frontier.
High street blues
Richard Finan, director at Arc Legal Assistance, is prepared to go further by saying the Act could signal the end of high street law firms, as bigger companies with greater buying power take on larger cases and employ less-qualified, lower-paid solicitors to handle straightforward cases. He adds: “I don’t think high street firms need to exist. How many people still go into their high street banker when they can do it online?”
One legal service provider’s perspective:
Richard Finan, director at Arc Legal Assistance, has been following the Act closely since the original consultations began. Speaking to Post, he outlines what he believes are the major points that insurers and legal companies should be aware of, along with the possible negative points of its implementation.
The Legal Services Act does four main things, says Mr Finan:
1. Creates the Office for Legal Complaints with an ombudsman. Up until now if you have a complaint against a lawyer or provider of legal services you would bring it to the Law Society, which is a regulatory organisation made up of lawyers regulating lawyers, so there are bound to be a few problems;
2. Forms the Legal Services Board that will be responsible for overseeing the regulatory body and any other bodies that supervise legal service providers;
3. Sets out what the regulatory objectives are;
4. And, finally, looks after the implementation of alternative business structures.
There are three potential issues that arise from the new Act, according to Mr Finan. The first is around conflict of interest. “If an insurer owns a law firm,” he explains, “the law firm still has to act in the best interest of customers but there’s a clear conflict because it’s in (the insurer’s) commercial interest to be perhaps more selective over the cases it runs, whereas if you’re an independent law firm you don’t have that problem.”
The second possible issue arises around regulation. Currently, the insurance market is regulated by the Financial Services Authority but this body will not be able to also cover the legal aspect of a company’s interests. “Everyone moans already about the FSA,” he says, adding that dual-regulation could be a deterrent for smaller companies. “If you’ve got a serious amount of work that you’re sending into your law firm then you can live with it. Most insurers will be big enough to do it and the big brokers will do it but the small to medium-sized broker possibly won’t.” And finally, Mr Finan says there is a potential issue if a broker or insurer decides to set up its own new law firm. “There has to be high volumes of work but, to deal with that, you have to be able to do so efficiently and have the structures in place to handle it,” he adds. As such, Mr Finan believes most insurers will look at doing joint-ventures with companies or buying a whole law-firm outright, which is already equipped to handle legal issues.
The full article can be found at www.postonline.co.uk