After the Event policies may appear to provide identical cover but, in these turbulent times for the market, solicitors should be giving just as much scrutiny to the company behind the policy, argues Paul Hurley, Director and Head of ATE at ARAG Legal.
Perhaps the alarm bells should have been ringing before AU Insurance Services went into administration, last quarter. An uninspiring web presence and the virtual invisibility of company and employees on LinkedIn should not necessarily be cause for concern, but these have been challenging times for after the event insurance providers.
The combination of the LASPO legislation, increases in regulation and insurance premium tax and, in some segments, defendants who challenge policies and premiums as a matter of course has made things particularly difficult for smaller, niche businesses with most or all of their eggs in the ATE insurance basket.
Whatever pushed AU Insurance Services into administration, it wasn’t the first small ATE provider to fail, and it won’t be the last. But bigger firms could also be finding the current climate difficult, so it is essential for solicitors to know precisely who they are dealing with and how securely the policy that they offer to clients is securely underwritten.
As in so many markets, headline prices may grab the attention, but the true cost of a policy could be far greater, especially if a provider should fail. If a deal looks too good to be true, then it probably is.
There are several questions that solicitors can ask to help satisfy themselves that they are minimising the risk, not just for the client but also for their own firm.
Who, for example, is underwriting the ATE policy and are they based in the UK or offshore, in sunnier, cheaper and significantly less regulated insurance markets?
Ratings agencies, such as AM Best and Standard & Poors, provide a good indication of the financial strength and security of the insurer behind the cover, so solicitors should be checking that the policies they are issuing to clients are backed by an insurer with an A (strong) or even AA (very strong) rating.
Whether the insurance provider that a solicitor deals with is an insurer, broker or some other type of intermediary, a policy that is widely used and has been thoroughly tested in the courts is likely to present fewer headaches for the firm and its clients.
It can be difficult for clients to select a law firm when they need a solicitor, but they are invariably best served by one that is experienced, financially secure and properly regulated. The same should also be true of their ATE provider.