Legal expenses insurance 'confuses public'
Monday 18th April 2011
Before the Event Legal Expenses Insurance (BTE LEI) could play a bigger role in widening access to justice, but the current design and promotion of these products leaves them a long way short of the mark.
More than four in ten (43%) of people surveyed by watchdog Consumer Focus said they knew little or nothing about legal expenses insurance - this is despite the fact that an estimated 25 million UK households currently have this type of cover.
Around six in 10 consumers already pay for this insurance in some form and the UK legal expenses insurance market is worth some £447million.
Two recent major legal reports recommended legal expenses insurance as a way of reaching people, even those on middle incomes or above, who would not otherwise have access to justice.
Consumer Focus argues that to play such a role, BTE LEI would need to be more clearly explained, more consistent in what it offers, better promoted and give customers more choice over their legal representation.
The watchdog is warning that even a better performing legal insurance market could not fully fill the gap that reform of "no-win, no fee" arrangements and legal aid cuts of £350million a year in England and Wales will leave.
To improve the legal expenses insurance market Consumer Focus wants to see:
* Improved consumer information and clearer marketing, such as comparison tables and key facts documents, to make it easier to understand policies and shop around;
* Consumer information and knowledge campaign to highlight the potential benefits of legal insurance;
* An independent appeals system so consumers can challenge if their claim is rejected;
* Freedom of choice so consumers can choose their own solicitors if they make a claim;
* A review by regulators of the impacts of referral fees and bundled bank account packages on the market and whether non-bundled policies, which offer more clarity and visibility, albeit at a higher cost, may increase the use and value of legal insurance.
Legal Expenses Insurance typically costs between £13 and £24 a year and is commonly bought as part of a bundled insurance product, like motor or home insurance. It usually entitles the buyer to free legal advice and representation related to their civil dispute.
Lola Bello, legal services expert at Consumer Focus said: "Worryingly for a product that millions of us have, there seems to be widespread confusion over what customers are actually paying for. If these insurance products are to play a more important role in providing affordable access to justice they must be truly fit for purpose.
"Eligibility for legal aid is dwindling and this has resulted in a lot of noise about legal expenses insurance stepping into the breach. Our research shows legal fees insurance could help some consumers but it cannot plug the gap that any legal aid cuts will leave behind."
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