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Consumer ignorance “the main challenge for BTE”

BTE: Consumers treat it different from other insurance

Expansion of the market for standalone before-the-event (BTE) legal expenses insurance is being held back by “lack of understanding” among consumers as to what it covers, a report has concluded.

It found that only 11% of consumers with BTE insurance had a standalone policy, as opposed to acquiring one through their car or home insurance.

Researchers said there was “some hope” that implementation of the Civil Liability Act next year, which will restrict the need for ATE (after-the-event]) insurance in lower value claims, could “boost the popularity” of standalone BTE.

“The fundamental problems faced by the market in the UK is the lack of consumer understanding as to what BTE insurance covers, lack of awareness as to what additional legal services are available from the insurance provider and confusion as to how to make a claim.

“Consumers do not judge BTE insurance in the same way they do other insurances: it is considered as an afterthought to getting motor or home insurance rather than as something with value in its own right.”

The report, BTE Legal Expense Insurance 2019 [1] by IRN Research, said “many in the legal profession had hoped” that standalone BTE insurance would gain in popularity after LASPO reduced the market for ATE by ending the recoverability of premiums.

“However, this has not happened. The UK market is in sharp contrast to the market in continental Europe, where BTE standalone insurance is widely purchased.”

IRN found that 25% of just over 2,000 consumers were aware that they owned a BTE policy. This would equate to 13m adults across the UK owning a policy.

“The actual number of policies is probably larger than this 13m because some individuals will have cover but may not realise it.”

Consumers with BTE tended to be “biased towards” men over the age of 35, from social groups AB and with net monthly incomes of £2,000 and above.

Half of them (49%) acquired their BTE cover through their car insurance and a third (33%) through home insurance. More than half (54%) preferred to complete at least of their insurance “customer journey” online.

BTE policyholders were more likely to be regarded as “intrepid buyers”- consumers who were “very confident about buying insurance and also very self-reliant” – than those without BTE.

The focus on buying from well-known brands was stronger among BTE policyholders than consumers as a whole and consumers with other kinds of insurance.

A large majority (74%) of BTE policyholders were prepared to negotiate to get a good insurance deal, compared to the 62% of consumers owning at least one other type of general insurance but not BTE.

The report found that the typical annual price for BTE insurance bundled into other forms of insurance was around £20-£30 per year, although freestanding policies costing as little as £10-£20 were available from several insurers.

“It is not unreasonable to assume a typical price of around £20 per year, suggesting a market of around £285m, or around £300m allowing for any under-reporting of ownership.

“This, of course, only covers the consumer BTE legal expenses insurance market and only covers those consumers who are aware that they own BTE and have made a conscious decision to take it out.”