OVERVIEW

Andrew Newman surveys the current legal expenses scene, and concludes that brokers can succeed in making their commercial clients in particular, fully aware of new responsibilities looming over the horizon

Legal expenses insurance

And yet the market is still largely untapped. Allianz Cornhill Legal Protection recently stated that over 40? of the 24 million licensed cars on the road in the UK do not have legal expenses insurance, leaving a market potential of over 10 million risks. In this Brokers' Monthly Legal Expenses Supplement, underwriting manager Peter Dobie says that on the commercial side a business is more likely to become involved in a legal dispute than suffer a fire at its premises, yet only one in three SME firms have a commercial legal expenses policy.

Much of the changing face of the legal scene has been driven by the demise of legal aid, which attracted predatory forces that saw the insurance industry as a potential gravy train. Many of these third party claims were ones that the insurance providers themselves were liable to eventually pay, but the aggressive speed with which the predators operated was too fast for insurers' established process. It led to an enormous shake-up, which was also accelerated by the Woolf reforms. Not for the first time, the actions of people outside the industry drove change within the insurance process.

Recent years have seen considerable strides in the commercial side of LEI. Brokers are faced with a sizeable agenda when preparing for most commercial client's renewals. Higher premiums in some classes of business often dictate some slimming down in other areas, and most firms insist on keeping their insurance premium budget within the limits they have become used to.

Meantime new covers have joined the traditional offerings as essential considerations for business firms to consider. As John Mullin of Composite Legal Expenses points out in his article, only rarely will a material damage claim put a firm out of business altogether, but a legal action could and does. He suggests brokers grasp the nettle and offer legal expenses cover to their commercial clients as an essential part of their service.

More than ever, brokers need to demonstrate tangible and substantial added value not only in their own offering, but in the products and services they promote. The current need is for more than just insurance protection. Customers now expect, and demand more. In his article Richard Scott Smith of DAS puts the case for commercial legal protection providing not just insurance indemnity, but additional benefits in the form of access to legal, counselling and tax helplines and business websites.

He looks over the horizon to a time when the extension of discrimination laws will bring in many more claims, with Tribunals having to deal with discrimination on several different counts, for example gender plus race plus religion. What used to be a two-day hearing often now extends to two weeks.

In October 2004, failure to follow correct procedures will automatically make employers 'guilty' for unfair dismissal. Smaller businesses that do not control these procedures through a personnel department will be particularly vulnerable.

But commercial legal expense insurance is not solely about employment. Its range extends across all contractual and personal injury defence issues, but as John Mullin points out, it is in everyone's interest for consumers to perceive it with confidence - as allinclusive protection and not merely a cheap add-on that may, or may not, solve a legal expenses problem.

It seems clear that legal expense insurance has to become an integral part of all business firms corporate planning, and since brokers dominate in the commercial business channel, it inevitably falls to them to get the message across. As Peter Dobie explains in his article, insurance brokers will play an increasingly crucial role as part of the ongoing drive towards business excellence.