Insure your way to justice

I am instinctively distrustful of insurance companies, despite the fact that a good portion of my monthly income goes into their coffers to keep my car on the road, the roof over my head and, in theory at least, provide me with an income if the worst happens and I can’t work. Hopefully, I will never have to call on my policies, although that only seems to reinforce the feeling that my hard-earned cash is just lining someone else’s pocket.

I am sure I am not alone.  I know plenty of people who have had run ins with insurance companies, including one friend who had to wait over a year for her critical illness policy to pay out after she was diagnosed with breast cancer because she had made a minor error on the form – the wait virtually bankrupted her.  I also know plenty of people who only take out compulsory insurance because they think there are better ways to protect themselves against other catastrophes.

And yet, the government seems to think that it is precisely these companies that we hold in such high esteem who can ensure access to justice following the decimation of legal aid and the curbing of no win-no fee agreements.  At the Downing Street ‘whiplash summit’ in February, David Cameron deliberately sidelined the legal profession and claimed it was the insurance industry that ‘plays such an important part in all our lives - it is there to help when we are at our most vulnerable and at greatest need’.

I find this rather odd, because I thought it was my lawyer who would help me when I’ve been in a car accident, or when I’m in danger of losing my home, or when I’ve been unfairly dismissed from my job.  But what do I know?  At least it all makes perfect sense now and I feel a bit stupid for not noticing it before:  the justice gap created by cutting legal aid and ‘reforming’ no win-no fee agreements will be filled by legal expenses insurance (LEI).

The problem is that many consumers, over 40 per cent, know little or nothing about legal expenses insurance, despite the fact that an estimated 25 million UK households, or around six in ten consumers, already have this type of cover.  This is because in most cases it’s part of a bundled insurance product and people probably don’t even realise they are buying it.

LEI is supposed to provide you with free legal advice and representation in relation to civil disputes, but it is often next to useless even if you do know you’ve got it.  It doesn’t cover family, defamation or mental health issues, for example, and you can’t choose your own solicitor but have to use one supplied by the insurer.  On top of that, in-house lawyers often do the initial assessment of a case, raising issues over whether they are working for the insurer or the claimant.

Having to use the insurer’s choice of lawyer presents more issues than simply a lack of consumer choice.  In order to ensure they remain on an insurer’s panel, lawyers may well find themselves providing a less-than-comprehensive service to the consumer to ensure they don’t rack up fees that exceed, or even get close, to the policy limit (normally between £30k and £50k, which sounds a lot, but whether it is or not depends on your claim).  But then what do you expect from a product that typically only about £20 a year or is even free?

Some of the difficulties blighting existing LEI policies could be easily remedied.  Last year Consumer Focus called for improved consumer information and a review into whether stand-alone products would be clearer and more visible, albeit at a higher cost.  It also wanted consumers to have the freedom to choose their solicitor under LEI policies and an independent appeals system so they could challenge a decision to reject their claim.

However, I think there are more fundamental issues in trying to fill the gap left by legal aid cuts with insurance.  The reason it is so cheap or free is because people don’t use it, and they don’t use it because they instinctively think they are protected anyway.  This expectation is not going to change over night, and neither is the automatic distrust we have of insurance companies.

More importantly, relying on LEI to cover legal costs is a surefire way of creating a two-tier justice system.  I can’t believe for a moment that those who will find themselves unable to get legal aid from next year will be in a position to buy an insurance product they don’t even know they need.

The justice minister Jonathan Djanogly has admitted the government will promote insurance as a way of funding legal expenses and predicted the cost of such cover will come down (down from free?).  The shadow justice minister, Andrew Slaughter, says annual premiums could be £150.  Research by Jures shows people would be reluctant to pay even half this.

I can’t help thinking if legal expenses insurance were the panacea, a straightforward, cost-effective and viable way of securing real access to justice, it would have been done years ago.  Rather, all I can see is a rampant insurance industry set to reap big profits from a government-endorsed expansion of legal expenses insurance.  This, of course, is probably at least part of the purpose.

In years to come we may find it is not your friendly local solicitor, or even your unfriendly one, who opens the door to the justice system.  It seems as if the lawyers who, for all their shortcomings, have an interest in justice and a duty to act in the interests of their client, will be sidelined in favour of the money men.  It will be insurers who decide which claims can be brought and which lawyers will get paid.  Doesn’t sound much like justice to me.