Lawful entry.

- Insurance Age staff
- 06 Mar 2000
- Indicative reading time: 3 minutes

The UK's legal framework is undergoing considerable change, including reforms to state provision of legal funding. The increasingly important role played by personal legal expenses cover will open many doors for the enterprising broker,Frank O'Malley

The legal landscape is currently experiencing radical changes. The
withdrawal of Legal Aid, the introduction of the Access to Justice Act and
an increased focus on alternative methods of funding for litigation are
all being heralded as key drivers in the future development of pre-event
legal expenses.

Research by the Consumers' Association in 1998 described legal expenses as
the domain of the "middle-aged and the middle class". This group, the 35-
to 54-year-olds, home owners earning at least £17,500 were also said to be
the most likely to have, or consider taking out, legal expenses cover.
But, it is also this group that has already been effectively
disenfranchised from the Civil Legal Aid system.

So, while the changes will certainly make big news and create an
environment of greater awareness of the country's legal framework, they
are just one factor in the future development of the market. The
cumulative impact of these other factors is changing the distribution
patterns for products and offering brokers new opportunities to build
successful personal legal expenses portfolios.

Change to tradition

Pre-event legal expenses has traditionally been sold as an add-on to
household and motor contracts. Its success to date is self-evident.
However, this traditional route to market is changing. Figures compiled by
the ABI show a 20% decline in the number of non-motor personal policy
units since 1995.

On the surface, this reduction seems to indicate a downturn of significant
proportions, but it is not that clear-cut. What the figure does not show
is the fact that changing distribution channels are effectively increasing
the spread of legal expenses in the population. A major contributing
factor is the move by insurers to include legal expenses as a standard
part of household policies. The impact is greater coverage from fewer
units.

We are now beginning to see an emerging role for e-commerce in the future
of the legal expenses market. In the last month, HUK-Coburg, one of
Germany's largest motor insurers announced the launch of its Internet
service offering policies direct to customers over the web. No doubt the
first of many new ventures in this area. We are also seeing solicitors'
practices moving into the pre-event market. Their interest is in the
development of bespoke products for specific client groups. These
developments could be viewed as threats to the broker, but there are now
clear areas of opportunity opening up outside the traditional lines of
distribution.

If legal expenses is to penetrate beyond the current demographic profile,
it must create empathy and help those new consumers to understand the
concept and value of the product. There is no evidence that consumers are
put off purchasing policies, but the focus is spreading out from products
targeting the family to encompass the wider population. The cover these
products offer is just as relevant to individuals, but the marketing may
not be getting the message across.

With so many groups calling for greater clarity in products and the
extension of consumer choice, both the providers and sellers of cover must
look "outside the box" to meet these demands. Innovative product
development, particularly in the area of scheme business and a clear
customer focus is emerging as a viable alternative for the broker.

Brokers are already aware of, and exploiting the opportunities available
to, the affinity employer and membership group market. Packaging insurance
for these groups is nothing new and, of course, commercial legal expenses
is an important part of the portfolio. But, personal legal expenses can
also play a role in developing commercial business for the broker.

The creative approach

A creative approach to scheme business can help to identify opportunities
in the area of employee and membership benefit packages. Group schemes
incorporating legal expenses, helplines and other assistance services are
already being marketed successfully to trade unions and other similar
groups. The experience of insurance providers in creating these schemes
can assist the broker to take advantage of opportunities to build in
personal cover.

Legal expenses cover is now finding its way into the employee benefit
package. Cost effective products and services with a perceived high-value
are very attractive to employers. Personal legal expenses lends itself to
this type of package. The composition of the cover also offers employees
access to helplines and coverage for other professional fee including
accountants - the self-assessment regime makes this type of cover very
relevant to many employees. There is clearly growth in this market and it
is a view supported by the Consumer Association.

One of the recommendations in their legal expenses survey called for
employers, trade associations and professional organisations to consider
offering cover as a benefit to staff and members. We may see government in
the future assisting the development of this area with incentives for
businesses.

In the coming months, the changes to the legal framework will dominate the
news. There is no doubt that this publicity will play its part in creating
a greater awareness of legal expenses, but the growth potential is being
driven by several other factors, and there is no doubt the broker will
benefit from the new distribution channel opening up. It is certainly not
a time for watching and waiting as the landscape changes.

- Frank O'Malley is head of sales and underwriting, Legal and Medical
Division, Eastgate Assistance.

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@insuranceage.co.uk or view our subscription options here: https://subscriptions.insuranceage.co.uk/subscribe

You are currently unable to print this content. Please contact info@insuranceage.co.uk to find out more.

You are currently unable to copy this content. Please contact info@insuranceage.co.uk to find out more.

As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.

If you would like to purchase additional rights please email info@insuranceage.co.uk

You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.

If you would like to purchase additional rights please email info@insuranceage.co.uk