Monday, 6 February 2012

A cut too far?

Why do so many businesses operate without legal expenses insurance?
We still hear statistics that the vast majority of SMEs operate without the benefit of legal expenses insurance and my brokers tell me some of their clients are opting out of the legal cover when their insurance package is renewed.

In hard times such as these, all costs are scrutinised more carefully, but is cutting the legal expenses from a policy a cut too far? Are they throwing the baby out with the bath water?

To me this has two aspects; is the cover understood and is it properly sold?

Important covers provided by an LEI policy
Is a legal expense claim likely? I recently read that an employment dispute is 12 times more likely than a fire. The usual employment settlement is £3,000 but they can easily run to tens of thousands.

Add to that other covers like tax investigation, regulatory cover (including health and safety defence) and contract and debt. ARAG LEI policies have a limit of indemnity of £100k, so for the low premium involved surely it is well worth having.

Adding even more value
Don’t forget that the policy also includes legal and tax helplines which some think are worth the money alone.

And what about the online document drafting service? This is definitely a valuable benefit with circa 100 documents available for download and tailored online to suit the policyholder’s needs. For example, property owners can access a buy to let guide, draft a tenancy agreement and download an inventory checklist.

Selling LEI
Most SME business is transacted via a broker, so clearly they have a vital role to play. It may be tempting to let the client delete the legal cover, take the cheque and run, but is that in the client’s best interests?

I have sat in brokers’ offices and seen their renewal checklist where right at the end there is a one-liner “Commercial legal expenses, not required”.

At renewal discussions, is legal cover relegated to this tick box exercise at the end of the meeting or is it better to take time to sell the benefits and explain the cover?

Hopefully the answer is the latter option and ARAG can lend a hand with training and advice on sales materials, just ask.

I have run my own business and I would state categorically that every SME should have legal expenses insurance.

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