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Thursday, 9 August, 2001, 14:19 GMT 15:19 UK
New threat to Claims Direct
Scene of a road accident
CIS Insurance: 'Legal protection' now standard on motor policies
Embattled personal injury company Claims Direct faces a new threat with the news that a major insurance company is offering legal protection to its customers for free.

The move by Co-operative Insurance Society is not only aimed at protecting their customers against negligence claims, but also against claims from personal injury companies following a landmark legal judgement.

If all motor insurers followed our example by providing [BTE] cover as standard this would eliminate the need for success fees and inflated [ATE] premiums

CIS Motor Insurance Manager Derek Wood

Offering "before the event" insurance as a standard term within policies could have serious ramifications for companies such as Claims Direct.

Until now, most insurance policies classed damages incurred due to negligence as "uninsurable losses", and would only offer "legal protection" as an additional extra for a fee.

Other companies are expected to follow suit - following a legal case which made insurers responsible for the cost of "after the event" premiums.

Business threat

Co-operative Insurance Society (CIS) is the first insurer to publicly declare that it is offering before the event cover as standard within its motor insurance policies.

It has joined forces with DAS Legal Expenses, a specialist personal injury insurer, to provide cover for 300,000 new motor policyholders as standard within their policies.

CIS is also offering the similar cover for its home contents policies and will be extending it to building insurance shortly.

CIS Motor Insurance manager Derek Wood, said: "If all motor insurers followed our example by providing [BTE] cover as standard this would eliminate the need for success fees and inflated [ATE] premiums."


A number of insurers offer an option to take out legal protection, including Direct Line, Royal & Sun Alliance and Axa, but they charge about 15 each year for the cover.

Most insurers are reluctant to take the plunge and offer legal protection as standard, because it could push up premiums.

They say they would lose their "competitor advantage".

But a spokesman for Royal & Sun Alliance told BBC News Online that it was considering its position.

Mike Wallwork, spokesman, said: "We have no plans at the moment to offer legal protection as standard, but we are looking at it as an option. We will make an announcement in the next couple of months."

An ambulance
Claims companies have been dubbed 'Ambulance chasers'

Claims managers such as Claims Direct argue that premiums should be recoverable from the defendant's insurer if their client wins.

Insurers are being forced to address the issue following a landmark legal case - Callery versus Gray - which concluded that insurers were liable for after the event premiums.

Tens of thousands of cases have been held up because of the case, which has contributed to problems at Claims Direct.

How much can be recovered by the Claims managers will be decided within the next couple of weeks, as the case has been referred to a costs judge.

Better for consumers?

There are some advantages of before the event legal cover.

Some after the event policies only provide cover for the cost of defending a negligence claim.

For example, CIS motor insurance policyholders through DAS are covered for up to 50,000 costs and unlimited damages, whether they are the claimant or defendant.

Unlike traditional personal injury companies which make their money by taking a proportion of the damages or costs, CIS customers can keep all damages awarded.

But experts fear that inclusive policies could push up the cost of motor insurance premiums - and are only really aimed at protecting insurance companies from claims from companies such as Claims Direct.

See also:

26 Jun 01 | Business
Claims Direct losses mount
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