Be ready for the changes to the Motor Legal Expenses Insurance market
Following numerous delays the Government have confirmed that the reforms contained within the Civil Liability Act 2018 will finally come into effect on the 31st May 2021 and it is imperative that brokers are prepared for major changes in the Motor Legal Expenses Insurance (LEI) market.
As a result, many drivers, both commercial and private, could soon unknowingly face extensive legal bills when they seek compensation after an accident.
From May, legal expenses policies may or may not cover driver’s bills for solicitors. Therefore, as the Ministry of Justice finalises the new rules and requirements, here are further details on these upcoming changes which we hope our brokers find useful and informative.
The New World
With the Small Claims Court limit currently set at £1,000, only a small percentage of road traffic accident claims fall within this limit. However, after 31st May 2021 it is predicated that as many as 97% of claims will fall within the new limit of £5,000. With solicitors then using the LEI policy to fund their costs, rather than recovering these from the liable insurer, there will be a significant increase in claims costs under the policy.
Keep vigilant for gaps in cover
When the new rules come into play brokers should always check the policy terms and conditions and review premium rates which can often miss out sections of cover. Keep vigilant and ensure cover for Small Claims Court cases has not been removed, diminishing the product value, and leaving customers with potential gaps in cover.
Where legal services and LEI are offered as a combined proposition, blurring between the lines of insurance and legal services could be used to disguise a legal service provider’s uncompetitive fee structure.
Therefore, to ensure clarity, it would be beneficial to separate the purchase of LEI from the acquisition of claims services. Keeping the LEI product separate from the legal services, or accident management provider, will enable brokers to independently assess the market ensuring transparency of costs and revenues are established in the whole supply chain.
Demonstrate increased customer value
The challenge here is to demonstrate value for money to the end-customer, ensuring they know how important LEI can be. You should view these reforms as an opportunity to provide a Motor Legal Expenses product that can demonstrate increased levels of customer value.
To help prepare for the changes, brokers should consider the following points when reviewing their LEI provider:
- Read the terms and conditions carefully to ensure appropriate cover is provided.
- Does the provider use relevant customer value measures?
- Ensure clarity and transparency in the assumptions that underpin the pricing, including cost and revenue.
- Is there flexibility for you to choose and manage the supply chain yourself?
- Look out for conflicts of interest, for example is the LEI provider independent, or do they have a financial interest in the claims supply chain?
- Beware of models where servicing Small Claims Court PI claims is required to access other accident management services.
- Is the solvency of the underlying insurer stable?
- Check the terms of the binding authority between the supplier and the insurer, to ensure that there are no separate agreements for the supplier to carry any of the risk for paying claims themselves
In conclusion brokers now more than ever need to ensure their customers have the best possible protection in place, without restricting cover to avoid additional policy costs. At TFP Schemes all our Motor Products automatically provide LEI Cover via ARC Legal Assistance Ltd to ensure security for our Broker Partners and the protection their customers need.
How we can help brokers
TFP Schemes is an established and trusted underwriting brand in the niche commercial motor market, providing a range of products including single vehicle and fleets for taxi and executive, including funeral, and wedding cars, along with a unique day driver scheme for day time only drivers. Products available also include Single courier, motor trade (road risks), truck mini fleet and taxi liability.
All our products are backed by A rated insurers, and underwritten by our experienced, dedicated team.
As part of Q Underwriting, our products can be easily accessed through Qtrade, where you can request quotes, manage renewals and referrals and access client records. Alternatively, all our partner brokers have direct access to our experienced underwriters based in Cardiff and we are always happy to trade in the traditional way where this is required. Please contact us via email@example.com or 02920 301030.