Further discount applied

Last week’s announcement of a new process for setting the discount rate applied to serious injury compensation did not come as quite the surprise that the sudden hike in March did, and the proposals seem targeted on the middle ground between insurers and those representing severely injured accident victims. ARAG’s Product Development Manager Lesley Attu takes a closer look at the announcement.

Liz Truss sent the insurance industry into a tailspin a little over six months ago, when she announced a change to the ‘discount rate” from 2.5% to -0.75%. Share prices dropped, premiums were hiked and the insurers’ PR machines went into somewhat unseemly overdrive, demanding that the ‘crazy’ decision to ensure that people with catastrophic injuries should be adequately compensated, be urgently reviewed.

It may not have come about quite as quickly as some would have liked, but the MoJ’s proposals for a new mechanism to set the discount rate seem designed to strike a compromise. If Lord Chancellor David Liddington’s prediction that the new system would currently generate a rate between 0% and 1%, then it could fall very close to the mid-point between the -0.75% that so outraged the ABI and the 2.5% that it lobbied and fought so hard and for so long to preserve.

The MoJ says it will maintain a 100% compensation rule so that claimants should receive full compensation for the loss caused by the wrongful injury, and not any more, nor any less. It has accepted that the existing legislation governing how the rate is set is unrealistic and could result in awards that significantly overcompensate claimants.

The consequence, it claims, is that the NHS and other public sector bodies can be adversely affected and insurance premiums are inflated.

The MoJ has also acknowledged that injury victims are likely to be more risk averse than ordinary, prudent investors but that “low risk” rather than “very low risk” investments would represent a fairer benchmark. 

Primary legislation is necessary and, once it is passed, the discount rate will be set by the Lord Chancellor, who will take advice from a panel of independent experts. The panel will be chaired by the Government Actuary and will include four other members who will bring experience as an actuary, an investment manager, an economist and a consumer investments expert. HM Treasury will continue to be a statutory consultee for each review, which will take place every three years.

The panel will still be able to set different rates for different types of case, but the principles behind how the rate is set will be set out in the legislation.

So far, the Lord Chancellor’s news has been received more enthusiastically by the insurance industry (and its investors) than those representing injured victims, but only time will tell if the new rate setting mechanism will prove fairer or not.

More cases are going to court

The Ministry of Justice has today published its Q2 civil justice statistics for England and Wales:  http://bit.ly/2vOexrj

Between April to June 2017, increases can be seen across most stages of county court activity (claims, defences, trials and judgments made).

• County court claims volumes are up by 40% compared to the same quarter 2016, driven by specified money claims (for example contractual disputes and debts).

• In April to June 2017, the highest quarterly number of County Court claims were lodged since 2009, at 565,000. Of these, 457,000 were specified money claims (up 54% on April to June 2016).

• Increases have also been seen in non-money claims for the second consecutive quarter.   For example, returns of goods claims have increased by 53% since Q3 2015.

• Claims were more likely to be defended than previously. For claims that had gone to trial in April to June 2017 the figures show a 10% increase in the number of defended cases.

• The average time taken from claim to hearing has increased.

Our view

The above figures corroborate the ever-increasing value of legal expenses protection and on- line legal services. ARAG policyholders can easily access online legal services to chase for outstanding debts and letters are available to download to help businesses, landlords and consumers to resolve a whole range of disputes.
Where, despite chasing for money that is owed, payment cannot be obtained; where the sum in dispute is high or where there is a dispute over goods and services our customers are insured against costs to proceed to litigation. 

ARAG Legal Services - www.araglegal.co.uk

ARAG Legal Services provides access to hundreds of reactive legal documents, forms and letters that customers can easily build on line together with a law guide.


Depending on which ARAG product they have bought the customer will have access to business, consumer or landlord content on the site.  For example, businesses can download a free employment handbook and employment documentation; consumers can download a free will and landlords can download a tenancy agreement and documents to serve notice of possession.  The site gives clear guidance and prompts.

I have been looking at what respondents to our Customer Feedback survey told us about their experience of using our legal services website. Access to the website is available to most of our before-the event legal expenses insurance (LEI) policyholders. It can be useful as a retention tool by providing value to customers who would not otherwise make a claim against their ARAG policy.

Here’s a snapshot of some of the survey results which covered 1 January to the end of July this year:

• 80% of respondents rated the ease of using the website as excellent or very good.
• 89% of respondents rated the quality of documents they created using the service as excellent or very good.
• 80% rated their overall satisfaction with the site as excellent or very good and 
• 90% would recommend the legal services website to family or friends.

We are grateful for the comments customers left as we can learn from the feedback and apply it to make improvements and to provide some educational commentary to help manage users’ expectations. It’s worth telling you more about some of the feedback we have received and I’m going to split my blog into two parts to avoid it being too long. 

Users of the service who have connections to insurance were particularly positive about the site ARAG Legal Services - www.araglegal.co.uk.

For example:

“I registered as an insurance broker, as this is a free service for XXX policyholders I thought I ought to see what was in there.  I must admit I was pleasantly surprised.  H&S and risk assessment advice is most useful to my clients (Motor Trade).  I felt a bit guilty using the log in code, so rang your customer service team to explain I wanted to have a look, and they encouraged me to do so. It has already helped me win one client. Thank you.”

Our response – We would encourage all our brokers to register and explore the site. You should have been given a voucher code but if you haven’t our Sales team can help.  We can help with staff training if that’s needed too.

“I used to manage an insurance brokerage and we were frequently contacted by companies promoting inferior legal cover add on products who concentrated on profit over customer outcomes. We always remained selling ARAG's legal cover as knew the service was exemplary and cover broad. I have always renewed even after leaving that employment and now work in FCA Compliance.”

Our response – It’s great to have such complimentary feedback. Thank you. We want our products to work well for customers. We take a keen interest in the FCA’s work and have been involved in several consultations – notably the Market Study of Add-on products. We support the FCA’s remedies although the value measures will not work for LEI as they are partly based on good outcomes for consumers being evidenced by high loss ratios. The best outcomes for our customers occur when we win their claim and can recover the legal costs from the losing party. The measures also fail to take into account the additional value customers receive from using legal advice helplines and down loading legal documents.

That’s enough bragging – I mean, blogging for now. Look out for part 2 which is more of an “education piece”.

ARAG legal Services – What customers said

This is the second part of my ARAG Legal Services blog.

We are grateful to customers who find time to leave feedback on their experience of using the website.

While I always hope for and never tire of hearing positive customer feedback, we also have some constructive comments that prompt a learning opportunity.

I would like to share a couple of these with you.

One customer wrote:

“I had a query about my policy but was told you did not have access to my schedule, this was problematic as I was passed back and forth between  XXXXXX (business insurer) and yourselves and took 2 hours to find out the information I was looking for”.

Our response -  We’re sorry. This customer had LEI embedded within a business insurance policy. While the business policy would have shown insurer contact details for customer queries, we can understand how the customer became confused. The technical team that look after the site content and deal with IT related issues are not insurance professionals, so we need to consider how best to direct individuals who raise with queries about their insurance policy back to their insurer/ or to our Underwriting team if the query relates to LEI.  We will look at messaging on the contacts page of the website and on our policy wordings to help smooth out the customer journey and direct clients to the right person to help. 

“I received an e-mail saying my enquiry could not be dealt with by them and to ring the legal advice line or submit a claim. As all part of the same company, would have thought my enquiry might have been referred to the appropriate quarter enabling them to contact me with a response. Also, legal advice line number is very expensive and the alternative number provided in the message was wrong. Why can you not use an 0800 number., Not impressed!” Our response - This customer raises a couple of points:          Cost.  The legal advice line phone number is an 0330 number. It costs the same to call as a normal home or business number and calls to the number will be included in landline call packages and mobile talktime and bundles of minutes.  Our legal advisors are happy to make a call- back so that we pick up the cost of calls for customers who are concerned about call costs.          Difficulty contacting us.  Our contact details (phone and e-mail) for general enquiries are shown on the legal services website and a claim form is also available to down- load. We’ve also put up some videos aimed at informing customers what to expect when they report a claim.          Again, our tech team is unable to dispense legal advice or deal with insurance enquiries and we will seek to improve messaging on the legal services website and on our policy wordings to clarify this

Finally,  I think this is a back-handed compliment!

Not what I thought I was paying for although I do like the idea of the free documentation you provide and would look for this from any competitor when I move away from you.

Our response… stay with us!