Monday, 12 September 2011

A new addition to your wedding checklist, get divorce insurance

I find myself in a strange predicament at the moment as I am getting married next month, yet at work I am charged with marketing ARAG’s latest offering, divorce insurance. This is not something that I imagined adding to my ever growing checklist when I got engaged however it has definitely given me some food for thought!

Launched to the market on Monday 6 September, the two products – Pre-nuptial Legal Solutions and Divorce Legal Solutions – will be sold alongside nuptial agreements and provide the policyholder with a legal expenses insurance policy that starts from the date of a marriage or civil partnership. Both policies cover costs arising from a legal challenge to the nuptial agreement whilst Divorce Legal Solutions extends cover to include the cost of divorce proceedings.

The Government has perhaps unwittingly paved the way for the development of such products with its plans to restrict the provision of legal aid in most divorce cases. As pointed out in an article by the Daily Mail (November 2010) these changes, “mean anyone who wants to protect their share of the fallout from a broken marriage will have to pay for their own courtroom advice... The proposal raises the spectre of hundreds of thousands of husbands and wives taking out ‘before-the-event’ policies against the cost of divorce.”

Further to this the landmark case of £100m pound heiress Katrin Radmacher highlights the huge potential for an insurance policy that covers costs arising from a legal challenge to the nuptial agreement. In the case, Radmacher’s pre-nuptial agreement was upheld by the Supreme Court, reducing her ex-husband’s settlement from £5.8m to around £1m. Following this, the Law Commission is considering a statutory framework for pre-nuptial agreements.

It therefore seems likely that interest in divorce insurance will grow considerably in the coming years. This trend is backed by figures in the 2011 Matrimonial Survey by Grant Thornton where it shows that 58% of their respondents (family solicitors) reported that their level of pre-nuptial advisory work has increased [in comparison to 2010], and the Office for National Statistics Bulletin showing the number Civil Partnership dissolutions in the UK in 2010 increasing by 44%.

Add to this the precedence set in some European countries where there is already an established market for divorce insurance and the potential for development in the UK is clear to see.

Two law firms who draft relatively high numbers of nuptial agreements – Mishcon de Reya and Prolegal - have already made these products available to potential clients. The press coverage received so far, including a feature on Radio 4 show PM, has also on the whole been positive:

The Guardian: "Getting married? Top legal tips for couples-to-be…1. Have a prenuptial agreement.

The Economist: “With half of all marriages doomed to fail, even the moderately hard-headed may be interested in ways of mitigating the danger.”

Financial Times: “So, you’ve just got married, what do you do? A) Go on honeymoon, B) Celebrate with your family, or C) Take out divorce insurance.

If you answered C then, (somewhat surprisingly), you are not alone... while divorce insurance is unlikely to take off for the mass market any time soon, it could work for individuals who have already taken the time to craft a pre-or-post nuptial agreement.”

Financial News: “For the high net worth individual for whom a pre-nup just isn’t enough protection from the one they love, Mishcon de Reya is offering additional new armour for their clients’ personal fortunes: pre-nup insurance.”

Moneyhighstreet: “Savvy investment”

I will leave it to ARAG’s MD, Tony Buss to sum up, “While some may see the very idea of ‘divorce insurance’ as unromantic, the realities of modern life and the government’s legal aid and costs reforms will make it harder for ordinary people to access justice before the courts, meaning this is the right time to launch such a product.”

Find out more about the products: Pre-nuptial Legal Solutions Divorce Legal Solutions

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