DAS's Paul Asplin gives his views on a future price hike
The way legal expenses insurance is sold in the UK and Ireland is becoming unsustainable because of increasing claims frequency, according to Paul Asplin, chief executive of specialist legal expenses insurer DAS.
Unlike the rest of continental Europe, where legal expenses insurance is sold as a standalone product, it is sold as an add-on to other policies in the UK and Ireland. For example, DAS offers a legal expenses add-on to household insurance, which it describes as its family business.
“I wouldn’t say the add-on model is dead by any stretch of the imagination, but it is under threat, and over the long term is probably not the way to do it,” Asplin says.
The add-on legal expenses coverage is typically much cheaper than the standalone product available on the Continent. By way of illustration, Asplin says a UK policyholder might pay around £30 for an add-on, while customers might be charged €300m (£260.6m) for the standalone policy elsewhere in Europe, but for more or less the same cover.
Change takes time
However, Asplin believes this disequilibrium is only sustainable if claims frequency in the UK and Ireland is lower.
“Historically that has been the case, but people are not only having more legal problems, they are also much more aware of the cover,” he says. “Therefore, claims frequencies right across the board are increasing year-on-year. Over a period of time, it is inevitable that you would move to a situation where the claims frequencies are similar to the mainland European experience, as it would have to be priced accordingly.”
He adds, however, that the change will not be sudden. “I don’t think anyone is going to change the market in the short term – once you have established a market, it takes a long time to change it into something completely different.”
Jackson will be the death of it
While the UK model of selling legal expenses cover might not be dead yet, if the Jackson Review, Lord Justice Jackson’s recommendations for overhauling litigation funding, becomes law, would kill the after-the-event (ATE) legal expenses market, according to Asplin.
The Jackson Review seeks to abolish the practice of the loser paying the winner’s legal costs, which would remove the need for the insurance. “The sector would go up in smoke, quite simply,” says Asplin.
While acknowledging that such a blow would not be helpful to DAS, he adds: “Before-the-event insurance is the main story for us, so we would be a lot better off than some of our colleagues.”
