This article was provided by Rachael Wornes (pictured), marketing manager at ARAG UK.
Despite being available in the UK for nearly 50 years, legal expenses insurance (LEI) was, for much of that time, often seen as a lowly add-on, and sometimes poorly understood. While understanding, sales and popularity increased steadily for many years, the past decade has seen a quantum leap in awareness and demand for legal protection.
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Many of the factors contributing to LEI’s growth have been the headline drivers of wider disruption and transformation in UK society and beyond. Global financial crises, Brexit and the pandemic have all played their part in increasing demand, but a UK-specific, more gradual and less heralded trend has played a more significant role.
The civil justice system in the UK has become harder and harder to access and the support mechanisms once available to help SMEs and families navigate a legal problem were hollowed out during the decade of austerity preceding the pandemic. For many clients, this has turned LEI from “nice-to-have” to an essential cover.
Failures in the criminal justice system inevitably and quite rightly get more attention. If the innocent are waiting years to be exonerated while the guilty walk free because evidence and recollections have faded, then there are huge implications for society. But failures in the civil justice system can have equally serious consequences and, if anything, the impact has been even greater.
“Delays across the civil courts and tribunal services were certainly exacerbated by the pandemic and lockdowns, but they were apparent long before any of us had heard of COVID-19.” said ARAG’s claims operations manager, Heather Wilmot.
“Court and tribunal buildings were sold off, legal aid was repeatedly cut and the network of law centres providing advice and guidance has been reduced to a skeleton service.”
At the same time, legal expenses products have grown to fill the void, offering the added appeal of “day-one” benefits that policyholders can make use of, even if they never need to make a claim.
Legal advice helplines have been supplemented by online legal tools that empower individuals and small business owners to solve minor legal issues swiftly themselves where other routes to justice might either be unaffordable or not worth the wait.
These digital legal services also serve a preventative function, helping small businesses avoid legal trouble by providing easy access to the information and documentation now required to run even a micro-enterprise.
As LEI has grown in popularity, so has it also become better understood, allaying much of the criticism once levelled at less popular aspects like restricting a policyholders’ choice of solicitor and the ‘prospects of success’ clause, intrinsic to almost all policies.
“I think brokers, and even their clients to some extent, understand that legal expenses insurance only works and is only affordable if providers can maintain control over costs.” said Wilmot. “A solicitor wouldn’t advise a client to pursue a case if they didn’t have reasonable prospects of winning. Legal aid wouldn’t fund it and the courts take a dim view of frivolous or speculative cases.”
“From an insurer’s perspective, it’s even more fundamental. Funding claims that have little or no prospects of succeeding just to give a policyholder their ‘day in court’ would very quickly make LEI completely unaffordable.”
It is this affordability that has made LEI the success it has become. As other means of achieving justice have diminished or disappeared, legal protection offers an increasingly attractive way for people and businesses to protect their legal rights.