Direct Line outlines plan for ABS in partnership with Parabis

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16 July 2013

Oh yes: Churchill has been advertising its legal helpline

Direct Line Insurance Group plc is to partner with alternative business structure (ABS) Parabis Law to launch a wholly owned law firm, it announced yesterday.

The country’s largest car insurer first announced its intention to seek an ABS licence last October, and has now applied to the Solicitors Regulation Authority to license DLG Legal Services Ltd.

However, it said the legal business is not expected to make a “material contribution” to the group’s profits.

Direct Line has nearly 20% of both the motor and home insurance markets. It already provides customers of its own Direct Line, Churchill, Privilege and other brands with some legal services in-house and through outsourcing agreements with a panel of law firms, and Churchill has recently been advertising the benefits of its legal helpline.

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But it said in a statement today that it “now believes that it is in the clear interest of its customers for Direct Line Group to provide a broad range of legal services”.

When Direct Line went public last autumn, it revealed that it had received £110m in referral fees from solicitors over the previous three and a half years, plus a further £50m from credit hire referral fees.

As well as personal injury work, the new law firm will handle non-injury work, including debt recovery, employment and contract issues.

Direct Line has pledged that motor or family legal protection policyholders with injury claims will receive 100% of their damages, “protecting them from the cost of paying success fees typically levied by alternative legal services providers”. Customers will also be able to appoint a solicitor of their own choosing “in line with existing policy terms and conditions”.

Non-policyholders will also be able to instruct DLG Legal Services but will not benefit from the damages guarantee. The company said: “Where this occurs DLG Legal Services will agree a standalone fee arrangement with the customer under which fees will be deducted from the damages awarded, on a basis designed to maximise customer compensation after deducting case costs and be proportionate to the risk taken by DLG Legal Services.

“This fee structure will differentiate DLG Legal Services within the market as a firm whose customer offering is founded on ensuring affordable access to justice rather than levying the maximum permissible charges, which may see claimants lose 25% of any damages awarded as success fees, as is charged by some other legal providers.”

Paul Geddes, chief executive officer of Direct Line Group, said: “We’ve decided to launch a law firm to extend the legal services we provide to our insurance customers. We have the opportunity to protect our customers from excessive legal costs, especially in the event of a personal injury claim.

“It will also help our customers to have affordable access to justice, should they need it. This is a key concern of the government at a time when fewer and fewer Britons are eligible for legal aid as a result of tougher means testing. For all these reasons, we think the time is right to launch a competitive legal services business.”

Tim Roberts, senior partner of Parabis Law LLP, added: “This is a very significant development in a period of major change in the delivery of insurance and legal services. Direct Line Group is putting itself at the forefront of providing cost-effective quality legal services to its customers and we welcome the opportunity to be its legal partner.”

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