Posted by Calvin Smith, senior business developer at Legal Futures Associate Allianz Legal Protection
I recently read this article, which discusses the merits of legal expenses cover in relation to employment matters. I think it raises some interesting questions around how legal expenses insurers and the legal profession deal with the topic.
For years, insurance companies have used risk management services as a tool to engage with their customers and improve the risk that is being insured. If a customer feels that their insurer is invested in their business and actively wants to help them succeed, they are far more likely to renew their policy, purchase additional products and recommend them to their contacts.
Therefore, it shouldn’t be a surprise that legal expenses insurers, to varying degrees, look to help their customers in managing legal exposures and the costs from employment claims.
A large number of SMEs don’t have dedicated HR teams, with these matters being handled by a business owner or a general manager. This lack of experience when handling employment issues can result in costly employment claims. Even a relatively small award of damages could impact the financial security of a small business.
So whilst, on the face of it, it may seem a bit invasive for a legal expenses insurer to request that their customer calls them for advice, they are actually offering a valuable service. If that phone call stops the business taking an action that could have dire consequences, it’s worth the time spent in consultation. There is nothing wrong with an insurer helping a customer reduce risk, and fewer employee claims mean less aggravation for that customer.
With unique selling points in commercial insurance products becoming more difficult to find, additional services (including those relating to legal services, such as employee handbooks or contract reviews), may become more common in the market.
So where does the customer’s solicitor fit within this picture? I believe that it’s incumbent upon the legal profession to promote best practice in an employer’s dealings with their employees. I’m sure the vast majority of firms do. This means that a lawyer, insurer and insured can all co-exist in the same space, which is a sentiment I sometimes feel is missing in the legal sector.
Of course, if a customer has a comprehensive legal expenses policy which includes assistance with employment matters; it may be that they won’t need to obtain some services from their law firm.
This may appear to be bad news for the firm; however, we are living in an increasingly connected world. So rather than seeing legal expenses insurance as a nuisance, if the right circumstances exist, why not direct the client to their legal expenses insurer?
It might sound counter-intuitive, but if a customer sees their lawyer as part of a comprehensive solution for legal services, then surely they are more likely to develop an engaging relationship which will convert into fee income?