Brokers must check the credentials of both after-the-event and before-the-event insurers, warned Arc Legal Assistance.
The company said it has created a checklist to help brokers identify the most important areas to review when looking for a legal costs insurance partner.
Arc director Richard Finan, said: “The reputation of this market has been severely damaged by numerous high profile company failures in recent years. Perhaps now more than ever brokers need to ask important and probing questions of their prospective insurance provider to ensure they have the right credentials.”
He suggested brokers consider ten key areas when selecting an insurer.
Questions that should be asked include what the insurer's track record for the type of cover required is, and whether or not any side arrangements exist between the insurer and a coverholder.
Other areas included in the checklist are the kind of insurance structure and the location of the capacity holder.
“The increasing number of offshore providers entering the market may not offer your client real protection,” said Finan.
“By nature of their location these providers are excluded under the Financial Services Compensation Scheme which means brokers' clients might well be left to pay the costs, excesses and other expenses if the provider ceased trading.”
The checklist also covers policy servicing advice, avoiding pitfalls in the small print and supporting claims overseas, he said.
Full details are available at www.arclegal.co.uk.
