Insurers don't want to provide data in relation to "add on" products to help consumers decide on the "value" of the product.
Legal Expenses Insurance or Motor Legal Protection is an insurance "add on"
A lot of the focus of the report from the Financial Conduct Authority into the sale of add-ons was relating to products like Gap Cover, but Legal Protection insurance also comes under this banner.
An article in a trade magazine Insurance Age reveals that providing such information would be a very difficult task and the insurance lobby will argue that it won't help consumers decide.
Our position is that the insurers and brokers do not want to provide any data such as the amount of claims where motor legal protection policies have actually paid out any costs or fees as they rarely if ever do so!
Our own insider knowledge is that often the motor legal protection policy that many people buy for around £30.00 each year as an add-on to their main motor insurance policy actually cost somewhere in the region of £0.50p to £1.00. The mark up is therefore incredible at almost 3000%!
The reasons the core cost of the product to the insurer or broker selling the legal protection policy is so low is that the policies seldom, if ever, pay out any legal fees. The solicitors who get appointed to deal with the claims work are essentially told never to claim for any fees if they lose a case and therefore the actual underwriter of the policy never has to pay out any money. Hence why the basic cost is as low as 50p.
If the claim does not appear to have "reasonable prospects of success" they will refuse to take the case on, so that no legal fees are incurred. Again, allowing the cost of the underwriting to be very low and the mark up and commission eared by the insurer or broker who sells you the motor legal protection policy very high.
We feel that insurers should have to reveal their claims cost exposure and the outlays they have had to make in relation to the number of claims they have had notified. We feel this would expose the true underlying fact that whilst motor legal expenses insurance/ motor legal protection is a good thing to have, the actual value of the product in terms of what you are being charged for relative to what the unit cost of the product is and the lack of any real risk the underwriting insurers face represents a product that consumers are being over charged for.
The alternative to being over charged is to look at the free alternatives like Free Motor Legal