Tony Holland (The Lawyer, 7 January) comes up with a useful suggestion about funding access to justice through expenses insurance, but the problems are likely to be more difficult than he admits.
In our system, the losing party pays the costs of the winner. There are sound reasons for this, but it does not sit easily with a profit-oriented insurer funding cases.
In medical insurance, an insurer can anticipate that x per cent of its policyholders will require certain treatment and that the treatment will cost £y. The legal insurer can estimate the value of x, but it cannot know in advance whether each of the claims will cost nothing or twice £y.
A second effect follows from this, that an insurer will wish to "cherry-pick" cases which are likely to be winners, and avoid claims in cases which the policyholder is likely to lose.
To see the result of this, look at the current state of the legal expenses insurance market. Insurers who believe they can cherry-pick successfully can set extremely low premiums, on the basis that virtually every case accepted will be a winner. The typical premium is less than £10 a year; contrast that with the several hundred pounds it costs to finance medical insurance.
This drives out any insurer who might wish to offer a policy funding litigation which is at all risky, as the legal aid system is supposed to do. Measures like tax relief on premiums, or better controlled and segmented costs, however welcome, would do nothing to assist.
As a consequence of present arrangements, legal expenses insurance operates successfully only in a field such as plaintiff motor accident and injury claims, where success (at least on liability) is relatively easily predicted, cherry-picking is possible and premiums are set accordingly.
The insurers generally require the appointed solicitor to work on the basis that he will expect his costs only from the other side; some insurers act as little more than an introduction agency between a client and a solicitor, whom they leave to fund the litigation himself.
This flies in the face of the indemnity principle, and can undermine the proper relationship between client and solicitor. It would be splendid if these results could be prevented, and legal expenses insurance became wider and more common way of funding – but can anyone suggest how we get there?
Stephen J S Hart,
Stanhope Pension Trust.