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

Keep up-to-date with legal services online

An ARAG Before-the-Event insurance policy comes with a host of additional benefits to sit alongside the core legal expenses cover. One of these extras is the legal document service that allows a policyholder to tailor and download a variety of legal documents as well as access the comprehensive law guide.

The documents, letters and law guide are all written by top solicitors and barristers. To ensure peace of mind for policyholders, all of the documents are frequently reviewed and updated.

One of the most recent updates to the law guide is a policy on the Bribery Act 2010. Providing an overview, the new policy will help ensure that a policyholder knows how to comply with the requirements of the Act and includes:

• Information and examples of unacceptable conduct for staff and stakeholders


• Guidance on the conduct expected of staff and stakeholders


• Guidance on how a business can prevent bribery and corruption


• Help with training staff and communicating the policy to staff and stakeholders

The downloadable documents themselves are split into topical sections depending on the type of ARAG policy you have. For example, with ARAG’s commercial LEI products the policyholder is able to access templates for legal documents relating to business-matters in the following areas:

• Business start-up


• Debts and debt recovery


• Ecommerce


• Employment


• Health and safety


• Intellectual property


• Property


• Purchase and sales agreements

Within each area is a list of legal document templates which are tailored to each client’s specific circumstances through a series of straightforward questions. The majority of the documents are available completely free-of-charge, with examples ranging from debt collection letters for unpaid invoices and a privacy policy for a website, to trademark licence agreements and employee discipline and dismissal packs.

Policyholders also have the choice to pay to have their documents reviewed either online or by a solicitor allowing for that extra security and an even more bespoke service.

To find out more about ARAG legal expenses insurance products and legal services online, either visit www.arag.co.uk or email enquiries@arag.com

Identity theft is on the rise

Imagine you’re in another country at a conference on your own. Halfway through the week you fancy a nice meal out after a long day networking. You go to use your card to pay and find that it has been declined. A quick (premium rate) call to the bank confirms that someone else has been spending your money with a cloned card in yet another country.

Fortunately the bank had picked up quickly that I couldn’t be in two places at one time so had put a halt on all transactions. After another round of security questions to confirm that I was the real McCoy and they instructed me to go to a cash machine at which point they briefly lifted the ban on transactions and I was able to get enough cash out to see me through. However, although a solution was found, this event changed the way I thought about my personal data and security for good.

The worrying thing is that fraudsters can obtain personal and financial data in many ways, the most common of these include:

• Sifting – rifling through post and rubbish, taking bank/credit card statements


• Lifting – stealing personal information such as identification, credit or bank cards


• Falsifying – completing change of address forms to redirect mail


• Spying – obtaining personal information from insecure websites


• Skimming - capturing details of credit cards


• Copying - accessing postal records

With the data collected, fraudsters can access bank accounts; obtain credit, goods or services; duplicate or apply for passports; and even claim state benefits all without the victim’s knowledge.

In a recent article the Financial Times (1) reported that fraud in the UK increased by 10% in the first half of this year compared to the previous six months, according to new figures from fraud prevention service CIFAS. Of the 111,504 cases reported, identity fraud made up almost half of the crimes, with a further 10% of cases involving the illegal hijacking of a victim’s bank account. Such cases involving the misuse of an account or facility have risen to their highest levels since 2009 and now account for a quarter of all fraud crimes.

Latest figures provided by the Experian Fraud Index (2) also show that incidences of identity theft are becoming increasingly frequent. In the first three months of 2011:

• 20 in every 10,000 applications for financial products were found to be fraudulent, representing an increase of 24% on the fourth quarter of 2010


• 35 in every 10,000 applications to open UK current accounts were detected as being fraudulent, representing a 58% increase than in the fourth quarter of 2010


• 12 in every 10,000 insurance applications and claims were fraudulent, this represents an increase of almost 4% from the fourth quarter of 2010 and 43% from the first quarter of 2010


• 34 in every 10,000 mortgage applications were also uncovered as fraudulent, which is the second busiest period for mortgage fraud ever recorded by the fraud index.

There are many ways to help prevent the likelihood of being a victim of identity theft and websites like http://www.identitytheft.org.uk/ offer practical tips and advice. However, if the worst does happen then an ARAG Family Legal Solutions Policy can be there to help.

Firstly with the Family Legal policy, your clients have access to Legal Services Online where they can download documents such as credit repair letters; they will also have access to the Legal Advice Helpline where they get advice from legal experts 24/7. In the worst case the policy covers your client for a dispute arising from the use of personal information without their permission to commit fraud or other crimes.*

If you would like to find out more about ARAG’s Family Legal Solutions policy and how it can help your clients please contact one of our sales team via email at enquiries@arag.co.uk

* Exclusions, terms and conditions apply; see the Family Legal Solutions Policy Wording for full details.

1. http://www.ft.com/cms/s/2/056ed486-b78d-11e0-b95d-00144feabdc0.html#axzz1TUQbbJsZ (26 07 11)
2. http://press.experian.com/United-Kingdom/Press-Release/uk%20current%20account%20fraud%20surges%20in%20first%20quarter%20of%202011.aspx

The second reading

On 29 June 2011, the Legal Aid, Sentencing and Punishment of Offenders Bill went through, and passed, its second reading in Parliament. The Bill, which seems to have divided opinion in government, proposes changes in legal aid, civil litigation and the sentencing and punishment of offenders.

With regards to legal aid, the Bill proposes cuts in funding of £350 million meaning that people will be unable to obtain legal aid for most cases in private family law (except domestic violence), clinical negligence, employment (except those brought under the Equality Act) and debt and welfare issues amongst others.

As announced by Ken Clarke in the reading, legal aid will also continue for cases where, “people‘s life or liberty is at stake, where they are at risk of serious physical harm or immediate loss of their home or where their children may be taken into care.”

Clarke defended the legal aid cuts by stating that, “The scope of legal aid has expanded too far”, giving the example of taxpayers who are “forced to pay for legal advice to foreign students whose visa applications are turned down.”

Mr Elfyn Llwyd argued back that, “these provisions will disproportionately affect the most vulnerable in society, particularly people from ethnic minorities.”

Joan Ruddock also identified that her constituents “are people who need advice on immigration, on welfare and on housing” and asked “Where am I to send them? How are they to get justice with the provisions in [the] Bill on legal aid and on no win, no fee?”

The second section of the Bill aims to reform civil litigation and implement many of the proposals laid out by Lord Justice Jackson. The changes include removing the recoverability of success fees and After-the-Event (ATE) insurance premiums, increasing general damages by 10% and capping success fees at 25%.

The Labour response to the proposed changes was strong. Sadiq Khan, the Shadow Justice Minister, described the Bill as “incoherent, inconsistent and obsessed with cutting costs.” He went on to attack the proposals, explaining how the government’s motivation is driven by “their zeal to fix the so-called compensation culture.”

Khan’s deputy, Andy Slaughter continued:

“Turning to the Government’s meddling with civil litigation, they justify the need to upend no-win, no-fee by reference to the compensation culture.

“The Government are legislating to fit false perceptions. A system that allows people on moderate incomes to access justice is being overturned to please the insurance industry and large corporations.

“While the justification for reform may be imagined, the victims are all too real: children brain-damaged by medical negligence, workers injured by unsafe machinery or suffering industrial disease.”

With specific regard to the small concession of keeping recoverability for disbursement-only ATE insurance premiums in clinical negligence cases, Sir Alan Beith noted that “it is not clear to those who understand the system that there would be a viable market in after-the-event insurance in such a narrow field, when it has been abolished in other areas.” An important point, as legal insurers do not see a feasible way to provide this type of cover.

A large portion of the debate was taken up by referral fees, which was odd as they are not covered by the Bill. Several MP’s called them a “scandal” and Jack Straw quoted a solicitor who described them as a “form of legalised bribery.” He went on to say that they drove up costs and premiums and brought into question the “integrity of the whole of the motor insurance industry.”

So all in all, many of the concerns raised were for the victims who either through the legal aid cuts or civil litigation reforms will be worse off and have limited access to justice. As Baroness Hale stated in the run-up to the second reading, the Bill will have “disproportionate effect upon the poorest and most vulnerable in society".

The (un)Justice Bill

It is with regret that I am writing this blog as it means that the government has chosen to ignore the negative response that it received to both the Jackson reforms and legal aid cuts and instead implement them in the Legal Aid, Sentencing and Punishment of Offenders Bill.

Despite recent support from three cost judges and non-stop campaigning from groups like the Consumer Justice Alliance (CJA) and Access to Justice Group (AJAG) as well as consumers themselves, the Bill was first presented to Parliament on 21 June.

With only a few concessions, the Bill lays out plans to implement the legal aid and civil litigation changes in full. This will mean massive funding cuts in legal aid, removing provision to pursue cases in areas such as clinical negligence, debt issues and divorce cases and will leave some of the most vulnerable without suitable access to justice. In a recent Law Society Gazette article, Linda Lee, President of the Law Society, said how the Bill, “amounted to an attack on the vulnerable and was fundamentally wrong”.

On the civil litigation side, the much-criticised Jackson reforms will remove the recoverability of success fees and After-the-Event (ATE) insurance premiums, therefore shifting legal costs on to the victim.

The AJAG response to the Bill highlights in its summary the reasons why these changes will “result in a major denial of access to justice for claimants”; a few of these are detailed below:

• No win, no fee claims are not the preserve of the wealthy - 53% of claimants earn less than £25,000 per year and only 18% over £40,000


• Almost 3 million people benefitted from this form of funding over the last 5 years


• Currently, success fees and ATE insurance provide important checks and balances, acting as a brake on unmeritorious cases


• Without recoverable ATE, risk aversion by claimants will mean many perfectly good but problematical cases will fall by the wayside


• The proposed 10% uplift in general damages would not compensate claimants for losing up to 25% by way of success fee

Similarly, the CJA in its response describes how the “government’s proposals would ultimately mean that many victims, entitled to rightful compensation, would be unable to obtain proper legal representation due to the financial constraints that the new system would create.”

The Bill’s fast-tracked nature is another cause for concern. The consultation paper closed in February this year, just six weeks later Ken Clarke stood in the House of Commons to announce that the civil litigation reforms would be implemented in full. Now, just two months further down the line, the Bill has been presented to Parliament and rushed through to its second reading in just 9 days.

The worry is that the mainly negative reactions to the proposed changes have been ignored and the impact on the public has not been properly assessed. Some have expressed ‘outrage’ at the speed and Nigel Muers-Raby, CJA Chairman, comments how the government is, “pushing through sweeping and dangerous reforms with alarming speed.”

He explains further that, “by publishing such a wide-ranging Bill, it is the controversial sentencing aspects that will grab the headlines. However, buried in the Bill, you can see that thousands of injured people will suffer as a result of what is being proposed – the door to justice is effectively being slammed in their faces.”

Now that the second reading has been completed and debates have opened up on referral fees and market viability for ATE insurance in clinical negligence cases, a more in-depth analysis is required. Check back soon for our next blog - The second reading.