A new report by the Legal Services Board of England and Wales (LSB) includes calls for legal expenses insurance to be promoted more widely to consumers, in order to widen access to legal advice amongst the public. The report estimates that 3.6 million people in England and Wales experience unmet legal need as part of a dispute annually, with few consumers able to pay for unexpected legal costs out of pocket. The report also found that millions of households have legal expenses policies as part of their insurance plans, however, they are rarely used, with only 7% of people who have not paid out of pocket for legal services having used insurance.
Previous research by the Financial Conduct Authority suggests that around 15 million adults may have legal expenses insurance. However, the LSB has found that as this is often included as a standard feature in home insurance contracts many people may not realise they have it. The LSB’s research found that participants had little understanding of these products and how their use.
The research also demonstrated that amongst the respondents, the majority assumed that legal expense insurance would be more expensive and restrictive than it is in reality, thereby limiting the role that this type of insurance is able to play in managing unexpected legal costs. Most respondents expected the cost to be at least double the average cost of £20-30 per year. Another misconception was that protection was only provided in relation to the product the insurance was sold alongside. In fact, while a product purchased with home insurance might cover housing issues, it will normally also cover legal issues related to employment, injury, contracts and other areas of law.
Steve Brooker, Head, Policy Development and Research at the Legal Services Board, said: “While legal expenses insurance is not a fix-all, it has the potential to protect more people from unexpected legal costs and is cheaper and covers more issues than many consumers think. People often need legal help when they are at their most vulnerable, for example when facing a housing or employment issue. Legal expenses insurance can provide consumers with the peace of mind that the cost of legal advice and representation will be covered. We see legal expenses insurance or similar products as one of the ways to enable more people to access legal services free at the point of need. The insurance industry has a role to play in better promoting legal expenses insurance to consumers and building stronger confidence in these products.”