Did the Government foresee problems for BTE insurers when they proposed the ban on referral fees? I don't think so.
If I recall correctly, Before the Event Insurance was touted as the saviour for personal injury claimants. I am more than happy to point out that I told them this wouldn't work in this very blog back in February.
What's the problem Daniel I hear you cry? Well, the problem is all about, as ever, money. You see the true 'cost' or 'burn cost' of a BTE policy is not the £25 fee tacked onto your motor policy. More often than not this fee is swallowed as commission by brokers. Prior to Jackson BTE providers were unusually more than happy for policyholders to make a claim. The reason was of course that they could sell the claim to a solicitor for a massive referral fee. Admiral was famous for this - the referral fees made up a fair chunk of their annual profits. More claims meant more profit. Yey!
Post-Jackson, this has all changed. The claims can't be sold anymore so they represent a major cost to the insurer - much more than the £25 premium. Bang goes their nice little earner.
One solution would be to put the price up but that means fewer policies would be bought (not more as predicted by Jackson). What else can they do? Well, it seems some have decided to charge the client! Yes that's right, there are some major BTE insurers (not naming any names here but a quick clue: they used to be owed by a famous Gentlemans club hence the name and they also fix cars by the side of the road) who are writing a charge of 25% of the client's damages into their insurance policies. In return for £25 per year, the policyholder has the right to be forced to use a particular solicitor and has signed away a quarter of their compensation. Is this really insurance? They will argue yes as they cover the disbursements but it doesn't really make financial sense. Why pay £25 each year for the 10 years it will take the average motorist to have an accident? Why not pay nothing unless you actually do have an accident then pay £100 for an ATE policy and 25% to your solicitor?
So a bit more crystal ball gazing here - I see the demise of BTE over the horizon.
Sorry - I digress. The title of this piece is 'Defeating' BTE policies. What solicitors don't want is a BTE insurer taking away their client you see. So here are my top tips for stopping the rot:
1. Check the deal. If the client is with the RAC (whoops) then they will have to cough up 25% of their damages. Why not offer the client less.
2. Take out ATE insurance. Without it you can't say the client is insured against Part 36 risks and any costs/disbursements. Our premiums are very low. Take the premium out of your 24% (see what I did there)
3. Point out the advantages of our policy: it guarantees any Part 36 offer - if the client gets awarded less at a trial than an earlier offer, not only will our insurance deal with the costs, it will pay out the client's damages to ensure the client gets the original offer in compensation. The ATE policy also guarantees payment of at least £1,000 for the client. No BTE does this.
4. Tell the client not to pay the BTE premium on their next renewal as it isn't worth it. You will always do them a better deal.
So there you have it. Simples.