BTE insurance is often purchased as an ‘add-on’ to a motor or home policy, or in conjunction with a commercial lines policy. It covers the legal costs associated with bringing or defending an action, including the policyholder’s own legal fees and the other party’s cost should they lose. It can be a valuable product, saving the client time, money and unnecessary stress in return for a relatively small premium.
The BTE market is long-established with insurers offering products and solutions in the UK for over 30 years. In 2010, Lord Justice Jackson’s proposals identified BTE insurance as a suitable mechanism to support claimants, with a fundamental contention being that if his proposals were implemented in full, BTE insurance would help preserve access to justice in light of his other recommendations. The changes imposed under the Legal Aid, Sentencing & Punishment of Offenders Act 2012 (LASPO) have seen a reduction in the sale and use of ATE policies. But without the expected upturn in usage of BTE products, has this uncovered a knowledge gap between what Lord Justice Jackson thought possible and what BTE insurance is actually able to do? At least while sold, and priced, as an add-on to compulsory or more widely-used insurance products?
In short, not really; the expected upturn in BTE insurance usage hasn’t materialised. This may be due to purchase considerations and the increased use of price comparison sites where cost is often the primary factor, or due to a lack of awareness as to what BTE is and what it can be used for. Various reviews of legal expenses (such as the FCA Thematic Review into Motor Legal Expenses Insurance, June 2013) have corroborated this. A key criticism of BTE policies is that policyholders are often unaware of the extent of cover and don’t understand the process of making a claim. This means that they run the risk of prejudicing their position with their insurer.
Given the varying products and levels of cover available across the market, BTE insurance is unlikely to ever be fully understood by all. However is enough being done to communicate the benefits of this type of product to potential users of it? The European model of standalone BTE insurance permits policyholders to purchase cover that is best-suited to their needs. Also the mechanisms associated with making a claim are known in advance and the scope of cover is a relevant factor during the pre-purchase stage. The UK’s current model of add-ons, coupled with our common law jurisdiction somewhat inhibits the adoption of a like-for-like approach. However, with the Civil Liability Act 2018 gaining Royal Assent in December 2018, it could be that as the various changes filter through in personal injury matters, BTE may shine through as a more appealing product.