The price and quality of legal expenses insurance (LEI) are not correlated, a mystery shopping exercise by the Legal Services Board (LSB) has found.
While almost half (44%) of the home insurance policies in the study had a five-star consumer rating, while only 9% of the associated LEI products had this.
The oversight regulator sees LEI as a way to tackle some of the country’s unmet legal need.
Its 10-year strategy for the sector, published in March, said one ambition for 2031 was that “most households have an LEI policy or other mechanisms enabling them to access a wide range of legal services free at the point of need”.
The LSB’s mystery shoppers looked for home building and contents insurance which included LEI on four price comparison websites – Comparethemarket, Confused, Gocompare and Moneysupermarket.
Quotes were obtained on 74 home insurance policies, yielding 52 LEI policies, which could be matched with a Defaqto star rating.
The LSB said Defaqto star ratings, updated in February each year, were based on the comprehensiveness of cover, “acting as a proxy” for quality.
Criteria for legal expenses insurance include claim limits, areas of law, a range of policy terms and excesses, and service elements like online document services, discounted legal services, mediation and legal advice helplines.
Usually, the more comprehensive a product the more points it will score.
The LSB said there was a “low negative correlation” between Defaqto star ratings and prices – or “put simply, more expensive legal expenses insurance was not associated with higher-quality products”.
The oversight regulator said that the fact that 44% of the home insurance policies had a five-star rating compared to only 9% of the legal expenses policies may “suggest stronger incentives for insurers to offer higher-quality home insurance policies”.
Comparethemarket and Confused provided information on specific areas of law covered by LEI.
“Across both websites at least 90% of policies covered legal issues relating to the home, employment, contracts and injury. Supplying a defence, tax, the cost of jury service and clinical negligence were covered the least often.
“There was no evidence that areas of law differ based on whether the legal expenses insurance is provided as a standard feature of policies or sold as an optional add-on.”
Across the price comparison websites, around two-thirds of LEI policies were offered as add-ons, rather than as standard feature.
“All things being equal, we would expect the latter to be more expensive on average since the costs of providing the product should be reflected in the price.
“In fact, there was no statistically significant difference in average prices when comparing the two ways that consumers obtain legal expenses insurance.”
However, there was evidence that claim limits were lower where legal expenses insurance was included as a standard feature of policies.
Moneysupermarket was the only website to indicate whether access to a free legal helpline was included as part of the policy. It was in 31% of policies.
The LSB commented: “Consumers are not well placed to exercise choice of legal expenses insurance cover due to the way the market operates. In practice, consumers choose their home insurance policy, and this comes with the legal expenses cover provided by the selected insurer.”
The LSB has identified three ‘key asks’ from the insurance sector and legal service providers, including comparison websites, to help achieve its goal of greater take-of LEI:
- Raise public awareness and understanding of legal expenses insurance;
- Incentivise insurers to improve the coverage and quality on products; and
- Build trust through greater transparency and improve satisfaction with products.
Steve Brooker, head of policy development and research at the LSB, said: “Consumers need better information to support them exercise choice and purchase good-quality legal expenses insurance suitable for their needs.
“The insurance industry has a role to play in better promoting legal expenses insurance and to build stronger confidence in these products.
“Legal expenses insurance seems to be widely owned but little used, meaning that it’s not fulfilling its potential to close the access to justice gap.”