Irvine's reforms need financial clout

The Insurance Working Party, set up by the Lord Chancellors Department and the Association of British Insurers, met last Friday to discuss the logistics of putting the Lord Chancellor's legal aid reforms together.

Insurers were asked to make formal submissions on the reforms. Meanwhile, the financial implications for law firms, which may well face a struggle when financing conditional fee cases, were also being considered by a number of the banks.

The meeting highlighted the major problems which the Lord Chancellor will have to deal with. Particularly pressing were the changes in primary and secondary legislation and a review of the Law Society practice rules. However, one of the most interesting issues is that which the European Insurance directive raises – the freedom to independently choose one's lawyers.

Currently, most insurance companies use panels of law firms. Those clients taking out cover under their policies have to use the designated firms. This is more than likely to become a increasingly problematic issue for a number of important reasons.

Firstly clients should be free to choose their lawyers. But this right is becoming an increasingly grey area as insurers move into the funding of legal services.

Secondly, will those law firms which are not on the panel view the whole process as anti-competitive? This is an area which is wide open for a challenge.

The importance of the banks should not be under-estimated either. There is undoubtedly a need for the Lord Chancellor to quickly secure some sort of deal on this front.

Without adequate financing in place, there will be a key piece missing in Lord Irvine's reform jigsaw puzzle.