The Daily Mail has run a story today which features comments from Labour MP John Mann, who sits on a Treasury Select Committee. Mann has criticised insurance companies for adding on things such as legal protection and breakdown/recovery, which obviously helps boost the profits for insurers, MGAs and brokers alike.
But the breakdown and recovery market is not the easy pickings that Mann portrays. Experienced drivers will know that although you can obtain the first year’s breakdown cover cheaply from the AA, RAC or Green Flag, the price can often rise quite sharply in subsequent years. The Guardian took a look at this trend last year. In fact in one case quoted by the Guardian a driver found that his insurer offered breakdown for £80, compared to the £205 asked for the RAC upon renewal.
It is a similar nuanced story with legal cover. What is being offered exactly? It often varies from one insurer to another, and those who have had an accident may find that they are approached by law firms offering to take their case, but only if an insurance policy is signed, which protects the law firm from the cost of losing the case.
In the end, all consumers have a choice and insurers are only offering extras which make sense in a motor insurance marketplace. Many drivers want one policy, one contact point, which deals with breakdown, and the tricky business of navigating a claim should a road accident happen.
In an FCA survey, some consumers revealed in their comments that there is a general lack of understanding concerning what is being offered in terms of Legal Expenses. These are no-fault expenses. If you are partly to blame for the accident, then you may have to pay legal bills. One consumer told the survey company;
‘I think it should be part of the product and should be part of the product as standard. I don’t think it should be optional, when it is optional it is more complicated to choose, especially if you don’t know the depths of it, you are trying to pick and choose. It would be easier for people like me who don’t understand it all.’
This quote highlights a belief amongst many consumers that wraparound legal cover should be standard with car insurance. But who pays for those expensive solicitors, barristers and lengthy court cases? It isn’t free, people have to get paid a salary. That’s why there is a market in legal cover and the best advice anyone can give any driver is shop around, and check the T&Cs carefully.
The alternative to having policy extras is to make fully comprehensive – catch all – legal and breakdown cover part of every motor policy. That would probably lead to accusations by MPs and others that insurance companies were jacking up premiums to `milk’ the driver, as the average cost of car insurance would rise by about £250 a year, per driver. Good luck with that Mr Mann.