BTE could do more harm than good

Cracks have started appearing, already, in the cheap and supposedly cheerful legal expenses insurance regime much vaunted by insurers, government and ?others who have little or no real concern for the rights of accident victims.

In August we read about the case of the Manchester motorcyclist whose Bristol solicitors, appointed by legal expenses insurers, settled his case for £500,000 – when, as subsequently demonstrated, it was worth over £1m.

This was followed by reports last month on the rise in professional negligence claims against personal injury law firms citing “reliance on under-qualified staff, a lack of face-to-face contact with clients and failure to understand medical reports” as “all factors in the trend”.

Surrey firm Baker Law reported a recovery of £700,000 for a client whose original solicitors had achieved an award of £16,000. An associate at Withy King who said one claim was worth nine times the £10,000 settlement agreed by other solicitors added that most claims were by victims represented by panel solicitors located in a different part of the country.

Flat pyramid

Another professional negligence lawyer spoke of “the proliferation of claims lawyers where there are just one or two partners and a bank of paralegals” generating the problems.

None of this is surprising. The flat, wide pyramid structure represents a risk in many types of business. In an environment where an element of judgement informed by experience will always be required, it signals failure. Why do it?

Many of these firms are trapped in the business model created by legal expenses insurers whose policies sell for peanuts and are only bought by monkeys.

It’s not a universal problem. There are decent panel lawyers and there are BTE insurers who cut a fair deal. By “good experience” I mean that the client’s legal expenses insurer is prepared to appoint us at the outset of the case when the client needs us and to agree a sensible hourly rate for our services, rather than tell us to get lost because we are not on their panel of pet lawyers.

But in my experience the good guys are the exception and the evidence is beginning to show that so many who have taken the insurers’ shilling and sold their souls are delivering a shoddy service.

The Legal Ombudsman took a similar view in his annual report earlier this year anticipating BTE legal expenses insurance will be expected to fill gaps left by the Legal Aid Sentencing and Punishment of Offenders Act (LASPO) when it comes into force next April.

He commented on the danger that ordinary members of the public (at their most vulnerable in times of distress) with the ‘benefit’ of such policies may not know what their insurer will pay for or that ‘their lawyer’ will be reporting to the paymaster. The conflict of interest is patent.

Chief ombudsman Adam Sampson considers that: “It is possible, if not likely, that the reliance on legal expenses insurance may further confuse the consumer and further confuse their means of redress.”

Cheap and shoddy

On price competition he acknowledged the benefits but warned that: “a careful watch must be kept in case cheap and cheerful turns into cheap and shoddy”.

He added: “Whatever the connection between quality and price, it is clear that there are some providers who, in their desire to compete, are promising services which they cannot realistically hope to deliver for the price indicated or who are routinely falling below the minimum standard of quality that a consumer has a right to expect.”

This is all from the victims’ point of view.

What about insurers? Well it looks fine for them. They are driving the price of legal services down to increase their margins and passing the risk to professional indemnity insurers, by and large a different market.

Another commentator has made the valid observation that some if not all of these wicked under-settlements are driven by liability insurers who care nothing about injured people, their representatives or their indemnity insurers.

Let’s hope that the indemnity market will quickly decline to continue underwriting the risks generated by law firms who facilitate the greedy aspirations of insurers. One worry is that the increased cost of indemnity insurance, which will inevitably rise in consequence, will be visited upon all firms and not just those generating the claims.

Discerning proposal forms will find out – as they do now – the sources of business, and underwriters should be slow to accept the ‘systems’ and audits of legal expenses insurers as a quality standard where in most – though not all – the overriding concern is to maximise returns.

At the same time perhaps the properly informed consumer who has a right to expect a better service will exercise that right and find an independent lawyer able to deliver that better service, and more.