Has BTE’s time finally come?

Posted by Mike Wildy, senior business developer at Litigation Futures Associate Allianz Legal Protection

Wildy: BTE should not be a commodity product

The before-the-event (BTE) legal expenses insurance market is long established, with insurers offering products and solutions in the UK for over 30 years.

In 2010, Lord Justice Jackson’s proposals identified BTE as a suitable mechanism to support claimants, with a fundamental contention being that if his proposals were implemented in full, BTE insurance would help preserve access to justice in light of his other recommendations.

The changes imposed by LASPO have seen a reduction in the sale and use of after-the-event (ATE) insurance policies.

But the expected upturn in usage of BTE products has not materialised. Has this uncovered a knowledge gap between what Lord Justice Jackson thought possible and what BTE insurance is actually able to do – at least while sold, and priced, as an add-on to compulsory or more widely used insurance products?

The lack of take-up may be due to purchase considerations and the increased use of price comparison sites, where cost is often the primary factor, or due to a lack of awareness as to what BTE is and what it can be used for. Various reviews of legal expenses have corroborated this.

A key criticism of BTE policies is that policyholders are often unaware of the extent of cover and don’t understand the process of making a claim. This means that they run the risk of prejudicing their position with their insurer.

Given the varying products and levels of cover available across the market, BTE insurance is unlikely to ever be fully understood by all. However is enough being done to communicate the benefits of this type of product to potential users of it?

The European model of standalone BTE insurance permits policyholders to purchase cover that is best-suited to their needs. Also, the mechanisms associated with making a claim are known in advance and the scope of cover is a relevant factor during the pre-purchase stage.

The UK’s current add-on model, coupled with our common law jurisdiction, somewhat inhibits the adoption of a similar approach.

However, with the Civil Liability Act 2018 due to come into force in April 2020, it could be that, as the various changes filter through in personal injury matters, ATE insurance may not be suitable for the majority of lower-value claims. Could BTE insurance take its place?

After all, many would describe BTE’s purpose as preserving access to justice for those injured while driving, at work or under health trust care, as a result of negligence.

But perhaps it should be more focused on dispute resolution arising from contracts for goods and services or property boundary issues? If properly drafted, understood and used, it can provide certainty for all of these areas.

One thing that’s clear is that it shouldn’t be a commodity product sold solely as add-on cover. The requirements across different policies are far too varied for that.

For BTE to be able to respond to the needs of those who purchase it, it must be acknowledged that the premium needs to be calculated in a similar way to the more traditional household, motor or business policies.

And it must reflect the frequency and severity of the risks insured and how these materially impact the selling price.

It shouldn’t be in the fringes or even hidden away as a ‘free’ add-on. For those that have successfully used BTE policies, there’s often no argument when renewal rolls around – it’s always purchased again.

The jury is still out as to whether BTE will become more prevalent and widely used. But when the changes to the small claims track begin to bite and law firms are less able to offer contingent fee arrangements for smaller-value claims, we could see a move to targeted marketing of BTE products and services.

It’s incumbent upon the insurance industry to ensure that the products we develop are relevant, robust and responsive.

We must work to raise the profile of BTE insurance so that not only are the features and benefits understood, but also that making a claim under a BTE policy is as common and straightforward as it is on a motor or commercial combined policy.


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