Blog: Why customers are missing out on vital protection

We must do more as an industry to reframe legal expenses insurance (LEI) and highlight the broader benefits of the product to customers, demonstrating the tangible value it provides.

This was the view of the Legal Services Board (LSB) following recent publication of research suggesting that customers simply don’t understand the value of a product that addresses the unmet legal needs of consumers and offers a broad scope of protection across many areas of everyday life.

The Board further stated its objective for “most households” to have an LEI policy or similar mechanism for accessing funded legal services by 2031, but how can we as an industry turn the tide and better promote a service that is at best misunderstood and at worst, ignored at point of sale?

As a legal expenses provider, it’s a conversation we’ve been having on repeat for years. We know how valuable this type of product is, but with add-ons facing historic reputational challenges, brokers themselves often not understanding the full benefits of the product and a sales approach that can feel like an afterthought, legal expenses insurance just isn’t getting the promotion it deserves, leaving customers unprotected and facing significant legal fees if they need to seek advice, make, or defend a claim.

Perception
One of the challenges facing the take-up of legal expenses insurance products is perception, we believe there is a huge gap between the customer and broker perception of the product and the reality. From talking to new partners, we understand there can be a fundamental misunderstanding of what the product is for and how it can be used.

The term itself suggests a product that is only called upon if a claim occurs and if we’re honest, how many of us really think this will happen to us? Fortunately, we don’t live in a highly litigious society and the idea of needing to make or defend a legal claim is alien to many people. 

However, LEI doesn’t just offer support at point of claim. It provides free access to legal advice on a broad range of issues from employment disputes to identity fraud, personal injury to property disputes, the kind of support and expertise that could be invaluable, helping customers to avoid costly and stressful legal claims.

Over the past eighteen months, legal expenses insurance has been a huge support to many who might never have considered it before.

The initial wind down of the Government furlough scheme last October caused uncertainty for many UK employees, prompting a tripling of calls to our Legal Advice Helpline from concerned employees querying their rights over potential redundancies and employers seeking clarification and advice on how to fairly bring people back to the office.

Misconception
Another misconception arises from the historic reputation of the ‘add-on’. Once perceived by certain commentators as merely a way for the insurance industry to make money on products that offer very little value, the add-on has undergone an evolution. 

Those that demonstrated little or no value to the customer or were unfairly sold and administered have largely been weeded out of the market, the products that remain undergo constant scrutiny and evaluation to ensure that they continue to meet the changing needs of customers.

This is reinforced by the recent Financial Conduct Authority (FCA) value measures reporting requirement and General Insurance Pricing Practices (GIPP) market study.

Another barrier to customer understanding is the way that legal expenses insurance is often sold. For many, a tick box at the end of a long application or purchase process, or a throwaway comment “do you want to add legal expenses insurance?”, with very little explanation of the full benefits of the service or the scope of the product, this approach does little to emphasise the importance of the product to a customer. 

Value
We believe the matter of perception will partly be addressed by the FCA’s publication of value measures data next year. This data, gathered from insurers and accessible to consumer organisations and the media will include information about average claims cost, claim rejections and complaint volumes to help build a clear picture of product value across the industry.

By combing the FCA value measures with the value pertaining to the use of non-insured services, including legal helplines and online legal services, will allow provides to produce a full picture of product value.

Better product education is also key to transforming outdated misconceptions of legal expenses insurance. Insurers and brokers must work together to bring the product to life for customers, highlighting case studies and success stories that firmly ground the product in everyday reality, making it more relatable.

We must also work together to develop and embed a sales narrative that really emphasises the need for this cover.

Legal expenses insurance is so much more than a fallback in the event of a claim. For a low premium, it buys peace of mind and more importantly, access to free 24/7 legal advice at the end of a telephone line. 

It’s time for us as an industry to work together to showcase these benefits, provide comprehensive product training to our broker partners and help them to show clients that this is not just an afterthought, it’s an essential product that can lead to untold savings in both cost and stress.

Tim Mullin is director of product and insurer strategy at Arc Legal Assistance