The billion-dollar opportunity in legal expense insurance

The billion-dollar opportunity in legal expense insurance | Insurance Business Canada

The billion-dollar opportunity in legal expense insurance

Protecting families and businesses against the risk of unforeseen legal costs is still a relatively new form of insurance in Canada, but having originated in Europe, legal protection now generates close to C$20 billion globally and the opportunity for Canada is huge, writes Katherine Ferrante, Vice President, Sales & Business Development at ARAG.

The origins of today’s legal expense insurance (LEI) market go back more than a hundred years, but it was only in the 1970s that the concept started to take hold outside of Europe. The continent still boasts the lion’s share of this multi-billion dollar industry, but growth in the longer established markets, such as Germany, Austria and Switzerland, has understandably slowed.

Germany is still the undisputed global leader, boasting C$6 billion in premium income, more than three times its closest rival, France. It may be the longest established of all the markets, but year-on-year growth that was still comfortably north of 5% in 2016 suggests that the German appetite for legal protection is far from sated.

For younger markets outside of Europe, such as South Africa, Japan and indeed Canada, recent growth has been much more rapid, with Canada leading the field. In the year that ARAG first launched here, year-on-year market growth was over 50% and there has been no sign of it slowing.

But if the recent growth of LEI in Canada is encouraging, the scale of the opportunity for brokers here is truly breathtaking.

RIAD, the international association of legal protection insurers, was formed in 1969 and regularly gathers and publishes data encompassing most – if not quite all – of the global market. The latest figures released are for 2016, but they offer a useful guide to the potential for LEI here, through comparison to more established markets. 

The Netherlands for example, with a population less than half of Canada’s, has a market already worth more than C$1 billion. Belgium, with a third of Canada’s population, and Austria and Switzerland, each with roughly a quarter, all have markets worth more than C$800 million.

Business models, legal systems and sales methods all vary from country to country, which inevitably has an impact on the total premium written, but even the UK market which probably has most in common with our own, is closing in on that C$1 billion mark.

Clearly, the Canadian legal protection market is not going to achieve this level of penetration overnight. However, our current trajectory suggests that the billion dollar LEI market may be a lot closer than we might have thought.

Regardless of how quickly we get to that milestone, it is clear that LEI is one of the fastest growing sectors of our industry.  Legal expense insurance offers brokers a unique opportunity to differentiate themselves in a very competitive market by offering this new level of risk management. The key to penetration is building awareness.

It is an opportunity that we are always happy to discuss.

Katherine Ferrante is Vice President of Sales & Business Development at ARAG Services Corporation and can be reached at [email protected].


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