By Legal Futures’ Associates Allianz Legal Protection [1]
Sometimes we forget that the After the Event (ATE) insurance market is only two decades old. The ‘pause’ in our businesses over the last five months has given us all a chance to reflect on what’s happened over this time and anticipate what’s to come. Let’s think about what has happened. It’s easy to just look inwards, but realistically ATE products haven’t changed fundamentally, despite challenges such as LASPO (Legal Aid, Sentencing and Punishment of Offenders Act 2012). One thing that has changed though is solicitors’ understanding of what they’re recommending to their clients.
What’s really important?
Solicitors initially choose the products that they subsequently offer to clients; so they need to be confident that they’re offering the right choices. It may be easy to just compare products on price and go for the cheapest ATE product available, passing it on to the customer as a good deal.
But the world has changed since 1999, with increased regulation and compliance to protect consumers and improved buying disciplines adopted by solicitors when selecting ATE products.
Over time, solicitors will have used different ATE providers resulting in both good and bad experiences, and with this understanding, solicitors are now better equipped to know what makes a quality ATE product, beyond just price.
Key considerations that solicitors do (or should be) looking at when assessing the market include:
Financial security
Can the ATE provider demonstrate their financial commitment to the market? Covid-19 will undoubtedly have an impact on the financial markets, which will reduce underwriting capacity over the next few years1 [2] putting pressure on those ATE providers who in effect act as an intermediary and do not carry their own risk capital.
Claim payments
Who is ultimately responsible for making claim payments and what is the adequacy of the insurer’s solvency margin? A trusted insurer should be able to demonstrate their market expertise and longevity to meet their obligations three or four years after the policy was taken out.
Cover for the life of a case
Will the ATE policy provide adequate indemnity and can additional indemnity be provided if required? This hasn’t always been the case with commoditised and inflexible policies.
Disbursement support
On what basis is the ATE provider able to help with the law firm’s disbursement spend? Whether that’s providing funds or working seamlessly alongside a funder to provide a solution.
Product suitability
What provision does the ATE provider make to ensure that the ATE facility adapts to a solicitor’s operational needs as well as being adequate cover for the end customer? There should be clear operating instructions outlining the permissions the insurer is prepared to extend to the law firm in order to place cases on cover, provide case updates and any referral triggers.
Experts
Solicitors now question ATE providers on their market expertise, credentials and values. Remember solicitors are recommending the ATE provider to their client, and it’s on this basis that law firms need to have trust and confidence that the ATE provider is equal to their own standards.
Data and reports
Law firms want to understand how they’re performing compared to their peers, so the quality and output of management information from the ATE provider can often help drive mutually beneficial improvements to case type selection and positive case outcomes. Having clear key performance indicators agreed in advance by both parties (solicitor and ATE provider) will provide a positive structure to future account reviews and allow for early intervention and resolution.
A problem solver
The ATE provider should help solicitors try to solve problems rather than ATE being something that works independently from the legal action. Sometimes the answer will need to be no, which is no reflection on the solicitor or case being presented. However, if there’s a clear acknowledgement of risk appetite from the outset, then disappointing noes can be kept to a minimum.
This enhanced understanding demonstrates that solicitors are becoming ever more sophisticated buyers of insurance. This has to be a good thing as it means together, solicitors and ATE providers can develop better products which are capable of meeting clients’ changing needs and which proactively respond to shifts in external factors such as the state of the economy and subsequent impact on access to justice.
The next 20 years are likely to see more change in the legal environment which will have a knock-on effect on the ATE market, so it’s more important than ever to have a provider who looks forward rather than back.