Motor Legal Expenses Insurance: 10 Things You Need to Know About the Personal Injury Reforms
When the Civil Liabilities Act comes into force in April 2021 it will completely change how compensation for road traffic related personal injuries claims are dealt with. As a result Motor Legal Expenses Insurance policies must change. Unless the cover you are providing is ‘Reforms Ready’ you risk selling policies which are not fit for purpose under the new legal rules.
We’ve put together our ‘10 Point Reforms Ready Motor Legal Expenses Checklist’ below to help you to review the cover you currently offer, or to assist with benchmarking providers.
1. Are small claims covered, excluded or is the policy silent?
The reforms will move almost all personal injury claims to the small claims track. If small claims are excluded under the policy how will the cover benefit the policyholder if they are injured and want to claim compensation? Will there be an additional fee for the customer to pay at a later date and does that represent good value for the customer if that is the case? Policies may be silent on small claims therefore inferring that the policy will cover these claims. However without specific provision in the policy wording it will not be easy for the customer to compare cover or for comparison sites to show the product features accurately.
2. Does the policy fund full expert representation in the new portal?
Will the policyholder have to do anything themselves beyond providing information? If the service is not full representation and policyholder has to perform actions themselves it will appear very poor value for a premium and not in line with the principles of Treating Customers Fairly. How may this affect what you may charge in commission for the service and how many people might want to buy it?
3. Is the policyholder at risk of any costs or fees?
Is there anything the policyholder will need to pay beyond the premium at the point of claim? Are there any explicit fees? Is there an excess? An excess for personal injury claims will reduce the amount of compensation the policyholder receives and could be seen as another way of charging a fee for assisting with these claims. With the tariff of compensation significantly lower under the reforms, any reduction or cost to the customer beyond the premium paid initially is likely to be seen as very poor value.
4. Are small claims court disbursements covered?
It is possible that a policy might cover legal fees for small claims but not cover disbursements, for example, court fees, fees for medical or other expert reports. Whilst this could deem the cover to ‘include small claims’ there would be no benefit to the customer. In the small claims track there would not be legal fees to cover and without disbursements included the policyholder would not receive any contribution to or cover for court costs. Not all disbursements in the small claims track are recoverable even in successful cases e.g. representation at court.
5. Is litigation in the small claims track covered?
Cover may state small claims are included but if only pre litigation costs are included this would again represent poor value for the policyholder. Litigation is where the costs occur so ensure you understand what the policy will include and how it will benefit the customer in pursuing a claim at court.
6. Can the policyholder choose their own solicitor for small claims litigation?
The answer must be yes as it is a requirement of the Legal Expenses Act.
7. Can the policyholder choose their agent in the new portal?
Legal Expense providers can appoint an agent of their choosing pre-litigation and the policyholder cannot select their own. Find out how claims are handled pre-litigation. Who will provide information to the policyholder and what training and experience do they have to fulfil this role?
8. Does the policy work pre reforms as well as within the new legal rules?
If so this will mean implementation is much easier. If the policy is designed only for post reforms claims then there are additional complications around timing and switching over the live book.
9. How much premium must be paid before reforms implementation?
Ordinarily the higher rate premium required post reforms must be paid before the reforms come in. This is to accrue for the increased costs post reforms on policies that have already commenced pre reforms, so the funds are ready to pay the claims.
10. What will happen to advanced premium payments if the reforms are delayed?
Ensure the mechanisms to manage the risk of overpaid premium are clearly covered by the provider. Consider how extra premium will be returned to the customer and the administrative work required if this is the case.
What to do next?
Hopefully our checklist has helped to highlight the key things to consider in Reforms Ready Motor Legal Expenses policies.
We’ve been creating and distributing motor legal expenses insurance products and managing motor legal claims for over 30 years and it’s drawing on that experience that has helped us to build our own Reforms Ready MLEI.
We would be happy to talk about the changes that are coming up and to share our thinking on MLEI and small claims handling, just get in touch.