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Research & Reports | Do I need legal expenses cover?

Legal expenses cover - worth the money?

A Car-Insurance-UK-Supermarket.co.uk Survey

Research Report: 26 June 2011

by Emma Jamieson

Introduction

As the cost of car insurance has continued to increase, research from the Birtish Insurance Brokers' Association (BIBA) and car-insurance-uk-supermarket.co.uk, has shown that most motorists choose to prioritise saving money over getting the best cover for their needs.

Legal expenses cover, although it is sometimes included as 'standard' in car insurance policies, is generally an add-on at additional cost of, typically, around £20. It seemed likely that people would be less inclined to include legal expenses cover owing to its additional cost, given that the vast majority had been choosing to economise on their cover.

It is also unlikely that the public would be aware of imminent legislative changes following the Government's acceptance of most of the Jackson Report recommendations that render before the event insurance, as provided by legal expenses cover, more important and we wished to know to what extent the public would be rendered at increased financial risk if they were electing not to routinely arrange legal expenses cover when they renew their annual car insurance.

Our survey therefore aimed to investigate this issue.

Methodology

As our survey was completed on a voluntary basis, we needed to make it quick and easy to complete. We included a single multiple choice question beside the content on most of our pages and rewarded those that took the time to 'vote' with a display of the results of the voting patterns up to that point.

It would seem that their curiosity to see these voting patterns coupled with the ease with which they could take part led to reasonably effective uptake for a survey of this type and we were able to conclude the research in under four weeks in June 2011.

Our simple multiple choice question was displayed on the website as follows:

Optional Survey
(If you vote, you'll be shown the results)
When you buy car insurance, legal expenses cover is:

essential
useful, not essential
neither good nor bad
better avoided
a waste of money
Not sure
None of these

Respondents selected one of these options. Voting more than once was automatically prevented.

Results

102 completed the survey with the results breakdown as follows:

Option	No. of Votes	% of Votes
essential:	20	19.61%
useful, not essential:	29	28.43%
neither good nor bad:	19	18.63%
better avoided:	15	14.71%
a waste of money:	18	17.65%
Not sure:	0	0.00%
None of these:	0	0.00%
Total:	102	100.00%

Less than half (49%) regarded legal expenses cover as either useful or essential, while a third had a negative view of it, regarding it as 'better avoided' or a 'waste of money'.

Discussion

From this, it would appear that as few as a fifth would automatically take out legal expenses cover when they renew their annual car insurance although a further 29% would at least consider it. The fifth that were neutral about its utility would presumably accept cover where it was included as standard but would be unlikely to be willing to pay extra for it.

These figures are equivalent to only 6 million drivers at national level being definitely prepared to buy legal expenses cover with their car insurance. The vast majority, therefore, would appear to believe that legal expenses cover is not worth the money.

Legal expenses cover typically provides up to £100,000 of cover for legal and administrative expenses to recoup uninsured losses such as getting back the policy excess, reclaiming the cost of car hire or paying for phonecalls to the insurance company. But its main utility is to meet any liable legal costs incurred in pursuing a claim, typically a personal injury claim.

Pending legislative changes will render injury lawyers’ success fees non-recoverable from the liable car insurance company. They will be drawn from the damages awarded to the claimant. Market forces will drive down their size, so reducing reserves that currently allow lawyers to pay their other costs (known as disbursements) themselves. This cost will need to be passed on to the claimant in many cases.

In a quarter of injury cases, disbursements cost over £5,000 but they can cost more than three times this figure. While routine (‘base’) legal costs will be passed onto the defending car insurance company even where the claimant loses (as long as the case is judged reasonable), there will remain this potential new legal cost to the claimant.

Lord Justice Jackson, the author of the report behind the pending legislative changes, flagged up the need for ‘before the event’ insurance (part of legal expenses cover) as, following his recommended changes, changes which the Government has embraced and which form the core of a current white paper, the risk of incurring otherwise costly legal fees will increase.

The public, no doubt, are not likely to be aware of this change or its implications but it is certainly the case that post-Jackson the need for legal expenses cover will become more acute.

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