Legal expenses insurance products are all pretty much the same, right? Look closer

15th October 2018
BrendanBrendan Little

At a glance they may seem similar, but careful scrutiny of the products on the legal expenses insurance (LEI) market will reveal stark differences.

What’s more, in my opinion there are some markedly lower quality products out there. And while it might seem like a predictable thing for me to say about some of the offerings of our competitors, this worries me, because it isn’t always easy for a consumer to tell the difference.

How do they differ?

The types of legal dispute covered may look similar, the policy limits may be the same, and the excesses and waiting periods also tend to be clear.

So the difference between a ‘good’ policy – which I’d define as being a suitable policy which will potentially help resolve a customer’s legal problem – and a policy that could leave you with no help at all, is often found in the terms and conditions.

Of course that is the case for many goods and services; the problem here is that the poor quality of the product is only revealed when the customer attempts to make a claim. Only then does the customer realise that the policy they were sold will not help them, and that is a real issue from a fairness perspective.

How do these products fail consumers?

There is one particular restriction I’d like to highlight. In some policies it’s referred to as ‘proportional costs’, but in others it’s less explicit but comes in the guise of a condition whereby policy cover stops if it is viewed as ‘uneconomical’ to continue a legal action.

This means a customer may have a legal dispute matching one of the types covered by the policy, and which an appointed solicitor considers has prospects of success. The case will then progress but only until a point at which the solicitor assesses that it will cost the LEI provider more in legal fees than the customer can possibly benefit by from gaining compensation.

So while the customer may have a perfectly strong case which qualifies for cover, their insurance provider will withdraw cover because the cost of getting justice is too expensive.

Do all products have these restrictions?

No, not at all. A ‘good’ product will not assess the cost of getting justice – it can’t, that is just not fair.

A good product will assess the prospects of succeeding and if the opinion is that the customer is more likely to win than lose, then the appointed solicitor will progress the matter through to conclusion. My concern is that customers don’t know about this – it isn’t highlighted to customers.

In fairness to brokers, I doubt the LEI providers are even highlighting it to them. With these products, the margin, rather the details of how the customer will benefit – or otherwise - is not the deciding issue, and it really should be.

So brokers are just looking at profit?

No, that’s not quite fair. I think the reality is that most brokers don’t appreciate this hidden issue, and only realise when the product fails to provide cover for the customer when the expectation was that it would.

Personally I just don’t think all providers are being clear enough on the issue, and we shouldn’t forget that on many occasions the LEI cover is already included in the main home or commercial insurance policy.

What can brokers do?

Ultimately it’s all about awareness and education, and those of us who specialise in and provide LEI have a duty to help the rest of the industry understand this. Most of all, brokers need to challenge themselves on choosing the cheapest product ahead of the best one available.

Are they are prepared to put their customers at risk through a poor choice of LEI product? When you consider that the difference in price between a ‘good’ LEI product and a potentially useless one is only modest, there can surely only be one answer.

Brendan Little is Head of Sales and Marketing at DAS Ireland.

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