Can ATE Insurance policies be too cheap?
Well some ATE insurers are offering motor policies which are £40 + IPT. Excellent. All is wonderful with your client and your boss - the client has full protection and the firm isn't going to have to write off any disbursements. You are giving the ATE Insurer some nice business as well - 50 cases a month. That's £2,000 in premiums.
Well, not really. You see the ATE insurer's fixed overheads amount to £20 a policy, their running costs are £10 and they need to make a profit of say £5. So out of £40 there is perhaps £5 in each premium left to pay claims. Now 50 cases @ £5 = £250 per month available to pay claims. Not much is it?
What do you care though? That's the insurer's problem isn't it? If they have sold the policies too cheap then they still have to pay out on claims so they lose, not you or your clients.
Well no, they don't. You see, there will be several clauses in the ATE Insurance policy which allow the After the Event insurer to wriggle out of paying individual claims. One such term will be a 'prospects of success' clause. It will state that the policy is only valid as long as prospects of success exist. Everything will be hunky dory as long as your claims are low but when you put in that big £20k claim form, the ATE insurer will ask for your file and begin wriggling. They will refer to the 'prospects of success' clause and say that clearly the case should not have been pursued or an offer should have been accepted. They can prove this of course because you didn't win or you didn't beat that offer.
What's the result? Well they will refuse to pay that claim. Worse, you have now lost confidence in the ATE insurer but you are left with hundreds of clients insured with them. Can you be confident those policies will be paid out on? Are they in fact worthless?
When something appears too good to be true then there is probably a reason for it. Don't be fooled in this 'post-Jackson' race to the bottom. Very cheap premiums are worthless. Your clients will end up without proper cover and you will end up in a mess.
Think about it for a minute. If you give an After the Event Insurer £24,000 in business each year, are you really going to be able to make claims exceeding this figure or even half or a quarter of this sum? Isn't it better to buy a correctly priced premium for the type of claim which has no 'wriggle room' clauses?
I know just the company who can offer you this....