Consumers seeking the lowest possible price when buying insurance via aggregators are leading to a drop in take-up legal expenses insurance (LEI), according to leading LEI provider DAS.
The insurer said this will lead to a significant percentage of the population “being unable to pursue legitimate legal action; this will be further compounded by the changes to after-the-event insurance and legal aid”.
DAS said the price-driven nature of purchasers on aggregators has “no doubt hugely contributed to the drop in legal expenses take up”. It said motor uninsured loss recovery currently stands at an estimated take-up rate of around 50%, down from nearly 90% a few years ago, while family legal expenses has similarly fallen from a peak of 70% take-up rate to an estimated 40%.
Almost all of the policies sold via aggregators have the option of including legal expenses insurance. “However, because many people look for the cheapest policy on aggregator sites and are faced with up to 11 different add-ons, an increasing number are choosing to forego these add-ons, legal expenses cover included, in an effort to keep premiums down,”
DAS said that while aggregators are a very important distribution channel for individual motor and household insurance policies, it is “very concerned that this growing trend to purchase on price alone will result in a significant percentage of the population no longer having access to justice, as they will not be able to afford the costs to pursue a claim”.
Lyndon Willshire, head of sales at DAS, argued the LEI can play “a significant role” in minimising the impact of the Legal Aid, Sentencing and Punishment of Offenders Act 2012. “The government recognises and champions the fact that before-the-event legal expenses cover will play a pivotal role in today’s society,” he added.
LEI is under scrutiny at the moment, with the Competition Commission’s probe into private motor insurance taking in the pricing and complexity of add-on products, while the Financial Services Authority is also looking into add-ons, although the focus is not on LEI.