Relying on legal expenses insurance may 'confuse the consumer'

Adam Sampson, the chief ombudsman, has warned in his annual report for LeO that relying on legal expenses insurance to fill the gap left by LASPO and the Jackson reforms “may further confuse the consumer”.

In his annual report, published today, Sampson said: “One effect of the new Legal Aid Sentencing and Punishment of Offenders Act may be to limit access to sources of funding which have for many years allowed consumers to take legal action that they would otherwise have been unable to afford.

“It is expected that ‘before the event’ legal expenses insurance will fill any gaps.”

However, Sampson said he was concerned by the results of a YouGov survey commissioned by LeO, which aimed to find out how much people knew about legal expenses insurance.

At least 40 per cent of people surveyed had some type of legal insurance cover, but nearly three quarters of those were unsure or didn’t know what financial cover their policy provided, and only 11 per cent knew which legal services were excluded under their terms and conditions.

Sampson said that not only did many people not know what their insurer would pay for, they might not even realise that their lawyer will be reporting to someone else apart from them.

“This degree of confusion notwithstanding, legal expenses insurance is beneficial for the simple reason that it’ll continue to allow people to take legal action when they would not otherwise have been able to afford it,” Sampson said.

“But it can limit choice when the relationship goes wrong and the lawyer prejudges the view the insurer will take.”

Sampson went on: “It is possible, if not likely, that the reliance on legal expenses insurance may further confuse the consumer and further confuse their means to redress.”

Earlier in the report, he warned that increasing price competition in the legal services market could come at the expense of quality.

“Price competition is, as I have said, something to be encouraged and it is a gross simplification to aver that competition necessarily begets unethical behaviour,” he said.

“But a careful watch must be kept in case cheap and cheerful tend into cheap and shoddy. The issues involved in legal services are too important to allow quality to degrade.”

Sampson went on: “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.

“Sometimes we receive large numbers of complaints about one firm and it becomes clear that they have taken on more work than they can manage.”

The chief ombudsman added that transparency in pricing was a key issue.

He said that fixed pricing of legal services was not always possible and “there are signs that some lawyers are seeking to promise price certainty that they are then unable to deliver”.