Annual results 2013, record profits +120%

Annual results 2013, ARAG plc

            Record profits +120%

            GWP +9%

ARAG plc, the UK arm of the worldwide legal expenses insurer ARAG Group, has announced record profits for its seventh complete trading year (2013).

Figures confirmed by its Dusseldorf-based parent company show that its Gross Written Premium (GWP) under management increased 9% over 2012 to £46.9m whilst pre-tax and pre-amortisation profits were up significantly to £3.3m. The novel alignment to risk, because of a reinsurance share with the parent company, adds extra stimulus to profitable growth.

The number of individual personal lines policies insured rose to just under 3.5 million (up 15%) and Commercial risks were up 32% with just under 200,000 businesses now insured.

“It has been a challenging trading year once again”, comments ARAG plc Managing Director Tony Buss, “with increasing demands to initiate and respond to new situations that may require regulation or other change. Yet it is also one where product redesign and re-writing has been at the fore, new initiatives have been rolled out, additional benefits have been unveiled that widen the array of legal services available to policyholders and where there has still been time to restructure and expand our office space”.

Earlier this year ARAG acquired a further 60% office space boosting their Clifton, Bristol, Head Office to over 10,000 sq ft before announcing a new wave of recruitment to ensure its award-winning quality and service standards are enhanced as business develops further.

ARAG also retained the best Personal Injury Provider Award in 2013 for it’s After the Event (ATE) service and added the best Before the Event (BTE) Underwriting Service Award provider as voted by industry experts. These accolades were achieved despite distractions relating to the implementation of new legislation which directly affected the business.

With a new suite of commercial products having just been launched and both Home Emergency and HNW products in high demand, there are expectations that the company will retain good margins for consistent profits year on year.

“It's impossible to look too far ahead as we await the results of post-LASPOA claims” adds Mr Buss. “There have been too few closed cases under the new rules in the past 12 months. After a record breaking year in 2013 we are buoyed up by our consistent ability to deliver strong returns and expect to do so again this year, in 2015 and beyond”.

Tony Buss

Managing Director

No evidence of customer detriment in Law Society survey results

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

Why businesses need cover for restrictive covenants

Many employers don’t consider what issues might arise if they get the wording of a restrictive covenant wrong. The following case illustrates the potential pitfalls, not to mention the cost of having to take a restrictive covenant case to court, to protect your business interests.

Prophet Plc v Huggett

In this particular case the restrictive covenant had been incorrectly drafted by the employer which meant it did not give them the commercial protection it was supposed to. Prophet sells a suite of software products in the fresh produce sector. Mr Huggett was employed as a sales manager with a three month notice period. In December 2013 Mr Huggett accepted a job offer from a competitor called K3 who sold a similar product.

A clause in Mr Huggett’s contract was intended to prevent him from working or being engaged in any competing business for a set period of time. An error in the wording of the covenant meant that it only prevented Mr Huggett from selling Prophet products; as Prophets products were unique to Prophet, it didn’t offer the commercial protection it was intended to. 

The Court allowed Prophet to add a small change to the covenant preventing Mr Huggett from selling “similar products”. Having made this change, the covenant became enforceable and the High Court granted an injunction preventing Mr Huggett from working for K3 or any other software supplier in the sector until his covenant expired in Jan 2015.

Although unusual, the court can interpret a restrictive covenant so that a drafting error does not make it unenforceable. It is still a costly and complicated matter to take it to court to ensure the interests of a business are protected.

Restrictive covenants can be tricky to draft correctly and very problematic if a mistake is made, as a result issues with them are quite common. ARAG’s commercial cover will pay the legal costs involved in resolving cases like this one for commercial customers.  

David Haynes

Head of Underwriting & Marketing

A new face in BTE sales

Since joining ARAG in April this year as a Broker Account Handler I have had an eventful few weeks getting to know our clients, building on existing relations, while growing new business opportunities.

I have come from a legal expenses background, with over 6 years’ experience in the industry, from which I have established skills in developing new relations and managing the portfolio of business partners.
I am mainly responsible for liaising with Brokers regarding the renewal of their stand-alone or scheme business. My role at ARAG means I act as the primary day-to-day contact for Before-the-Event (BTE) enquires.

Should you wish to contact me  on a BTE matter, or discuss ARAG’s A+ rated range of products, then please get in touch via email or call 0117 917 1699.

Ben Parkinson-King

Broker Account Handler.

Bristol 10k in memory of Barry Tweddle – our mission is complete

 

Whilst many of you will have been enjoying a leisurely breakfast or reading the paper on Sunday morning representatives from management, sales, accounts and marketing met at the ARAG office. Sunday, 11 May, was race day in memory of Barry. Despite the slightly bleak weather, spirits were high, as we discussed our individual aspirations, shared thoughts about Barry and switched our focus to the 10k course.

 

Tony, Paul, George and Chris all finished within seconds of each other in the 52 minute zone. The ladies were delighted with a personal best at sub-60. We were supportive of each other and above all had fun.

The total raised stands at £1,285 and the good news is there is still time to donate. Please visit our 'Just giving' page www.justgiving.co.uk/ARAG  ARAG will match every penny donated. Any contribution, even a few pounds, is gratefully received.

 Examples of how your money can help

• £55 could give support to one patient, family member or carer who has been affected by pancreatic cancer through our information and support services
•  £100 could pay for a day’s worth of research into new treatments, better ways of giving existing treatment or controlling treatment side effects

In fond memory of Barry here are a few donation messages from people who had the fortune of working with him:

 

“Barry will never be forgotten by anyone who met him. He was a true gentleman”

“A very worthy cause in memory of a lovely man”

“Barry was a true friend, a person of integrity, a warm sensitive human being, and a credit to his profession”

For further information about ARAG’s chosen charity for 2014 please visit www.pancreaticcancer.org.uk

 

Not guilty, castigated and penniless thanks to LASPOA

Since defence costs orders were scrapped in October 2012, successfully defending a police investigation and subsequent criminal prosecution can ruin people’s lives and leave them bankrupt. There can be justice for the unfairly accused but it comes at a price, with huge legal costs involved, lives being devastated and careers often destroyed

In cases we have recently concluded, clients were proved to be completely blame-free but their costs ran into tens of thousands of pounds and their reputations were tarnished. Fortunately for them they had legal expenses insurance to cover their costs and provide the expertise to set the record straight.

 

Some occupations like care workers, policemen and teachers are particularly likely to end up on the receiving end of allegations of sexual or physical misconduct but it could happen to anyone. Without the backing of legal expenses insurance, a life-changing allegation can leave unjustly accused workers in a perilous financial position. In the two latest cases we concluded under the new legal framework, total costs amounted to around £45,000 with both defendants being completely exonerated.

Typically cover under can include representation from the first police interview 'under caution', through to a Magistrates hearing and then on to any subsequent Trial and Appeal. This cover can be added as an extension to both ARAG Group and Family cover. In the current climate of vigilance by the CPS such protection is more vital than ever.

 

David Haynes

 

Head of Underwriting & Marketing

1,000 employees a week try early conciliation

Before introducing compulsory early conciliation for all employment disputes from 6^th May, ACAS launched its voluntary early conciliation scheme from 6^th April for anyone wishing to try for a settlement in advance of bringing a dispute to an employment tribunal.

So far around 1,000 people a week contacted ACAS hoping to resolve their complaint against an employer within the 28 day period allocated for resolution to avoid the matter escalating. Where both parties are willing to come to a settlement ACAS can facilitate this.

We provide our commercial and family policyholders with access to a lawyer to represent their best interests throughout the entire early conciliation process. If the dispute cannot be settled through conciliation we will continue to provide support throughout the employment tribunal process.

The Government has high hopes for early conciliation and we will certainly keeping an eye how successful it is but whether or not the process meets expectations,  we will ensure that our policyholders’ claims have the best possible outcome, regardless of whether it is necessary to seek resolution through the tribunal system.  

 

Lesley Attu

 

Product Development Manager

ARAG disappointed at Law Society survey bias

We were very surprised at both the timing and content of the new Law Society LEI survey. The recent appeal cases of Webster Dixon LLP and Equity Syndicate Management/ Motorplus Limited t/as ULR Additions in England; and Sneller and DAS Nederlandse Rechtsbijstand Verzekeringsmaatschappij NV in the Court of Justice of the European Union have reinforced already firmly established rules of what is allowed and what isn’t when it comes to policyholders’ rights to choose their own solicitors and an insurer's liability for lawyers’costs.  Essentially nothing has changed.

Here at ARAG we have a substantial solicitor panel with no in-house handling carried out. We do not own an ABS and have no intention of competing with solicitors. With this in mind ARAG, together with other legal expenses insurance providers, have engaged with the Law Society over recent years to find common ground and a positive way forward with solicitors. Most recently, at the end of last year, discussions focused on establishing a non –panel solicitor agreement, to ensure consistency and fairness when a non-panel solicitor is engaged.

We were disappointed to see the Law Society take such a negative stance on LEI insurance, particularly considering that the survey is very unlikely to yield anything new in the way of solicitor opinions on freedom of choice. The rights of the customer are always our primary concern and there is no evidence to support the notion that reputable LEI providers are routinely or even occasionally, unfairly denying policyholders their rights in this area.

In our view, the survey seems very one-sided, almost to the point of being misleading. ARAG fully accepts that policyholders must not have claims “shoehorned” to inappropriate lawyers, and indeed, we will routinely try to match the type and complexity of the claim with the right firm and individual within that firm; where Counsel is required, they will also be suitably experienced. Provided an appropriate lawyer is appointed however, it remains to be shown what detriment there is to the client in having a panel solicitor appointed. Our experience shows time and time again that panel lawyers have better success-rates than non-panel firms, but at a much lower cost. Both outcomes are of course beneficial to policyholders in direct and indirect ways. We would therefore question whether, at the heart of the survey, the intention is to serve the interests of the client (which of course remains a solicitor’s overriding duty) or rather members of the legal profession that do not happen to be on an insurer’s panel.

Paul Upton

Head of Claims

Link to Law Society comment on survey

- http://www.lawsociety.org.uk/news/stories/law-society-launches-survey-on-legal-expenses-insurance/?utm_source=emailhosts&utm_medium=email&utm_campaign=PU+-+24%2F04%2F14

Bristol 10k - at ARAG running just got personal

Following the Santa run at the end of last year and a charity home makeover in March by our Sales team, see the RAG, a cross departmental ‘running’ team committed to the company’s corporate responsibility programme and the Bristol 10k on Sunday 11 May. Whilst often considered an individual sport, we wanted to unite with the common goal of running in memory of Barry Tweddle.

Barry, former Broker Account Manager for the West Midlands, died in January this year from pancreatic cancer. He was an honest, fun and sociable member of the team and is sorely missed. We pledge to raise £500 for Pancreatic Cancer UK www.pancreaticcancer.org.uk Pancreatic cancer still has the worst survival rate of all cancers, 5-year survival is only 3%. This figure has not changed in over 40 years*

I started running six years ago to drop a few pounds and as a social activity. That year I entered a local 5k race, shortly followed by my first Bristol 10k. I had literally got the bug, joined a running club and entered more races. I am fortunate to have a coastal path on my doorstep and there is nothing better than the sound of bird song, lapping waves and a view over a glistening sea to take my mind off the more inclined sections of a route. When training gets hard I like to remind myself ‘The voice inside your head that says you can’t do this is a liar.’

So, help us reach our target, as Tony, George, Paul, Chris, Lauren and myself don trainers and build up a sweat. Please visit our ‘Just giving’ page www.justgiving.co.uk/ARAG

*These figures are the latest available statistics from www.pancreaticcanceraction.org