Survey confirms that non-panel firms suffer detriment when legal expenses insurers exercise their right to appoint panel firms to deal with claims.
A
survey carried out by ELA in conjunction with the Law Society, APIL and MASS
confirmed that non-panel firms suffer detriment when legal expenses insurers
exercise their right to appoint panel firms to deal with claims. This right is
available to insurers until it becomes necessary to issue proceedings, and
where (for example when defending employment claims) the insurer is exposed to
paying civil compensation, unless there is a conflict of interest. The survey was completed by nearly 700
people, 48% of whom were employment lawyers.
It
is of obvious concern to members of the ELA that 90% of respondents had experienced
problems when conducting claims under LEI;
·
Only
14% of respondents said that it was viable for a solicitor to issue proceedings
and run a tribunal case at an hourly rate of £100 plus VAT, which is according
to the survey, the rate commonly paid under LEI policies. This reduced to 8%
for associates, 7% for senior associates and to only 4% for partners;
·
52% of respondents stated that they
had (frequently or always) lost instructions from a prospective client in
favour of a panel firm;
·
42% of respondents said that the LEI
policy terms frequently or always limited the rate payable to non-panel
solicitors.
There is no evidence from this
survey that ELA’s concerns translate into consumer detriment and the survey
found that actual complaints to the financial ombudsman (FOS) were rare with
firms being deterred from complaining because of alleged delays by the
ombudsman in resolving complaints. FOS data for the period April to December
2013 shows that 507 legal expenses insurance complaints were received of which
40% were upheld in favour of the customer – around 270 complaints if we
annualise the figures. Of these
complaints we do not know how many are connected with freedom of choice but we
suspect very few (if any) as in most cases disputes arise because of a disagreement
over the operation of policy cover.
Our own position is that we adopt a
flexible approach in negotiating suitable terms with non-panel firms where
policyholders wish to exercise their right to choose their own solicitor; but
the use of panel firms works well for our policyholders. In the main
policyholders are happy to use the services of panel firms as they realise that
the service standards that we demand of panel firms are beneficial and claimants
remain fully protected from paying legal costs. Policyholders can opt to pay
the difference where a non-panel firm will not accept instructions at rates
that we deem to be proportionate and reasonable given the nature of the claim.
We are confident (without conducting
a survey!) that our panel firms would not report problems in conducting claims
under our policies and the success rate of panel firms is significantly higher
than non-panel firms.
Waiving
our right to control the appointment of non-panel firms has a bearing on the
fortunes of policyholders who make a claim. Moreover a lack of capacity to
control costs would also result in significant increases to legal expenses
premiums across the board at a time when there
is government support for legal expenses insurance for individuals and businesses
as an affordable means by which to access justice.
What this survey makes clear is that
the LEI market is not working effectively
for non-panel firms because it does not deliver the rewards they seek. This
this is very different from a market that does not work effectively for
consumers. We would question how the ELA has been able to come to the
conclusion that the LEI market is not working well for consumers by conducting
a survey which was not targeted at consumers but at their own members. The ELA’s
position seems somewhat delicate as they have exposed themselves to debate
about their true motive in conducting such a survey. Surely a survey which
purports to be in the interest of consumers would not focus on their own
members?
The ELA are to publish the second part of their
survey soon which will gather
more detailed evidence of the problems experienced (by their members?) when
conducting cases under LEI policies.
David
Haynes
Head
of Underwriting & Marketing
No comments:
Post a Comment