Commercial Legal Expenses - The key to CLE.

(From Post Magazine)

The commercial legal expenses market is vastly undersold and insurers should encourage and educate brokers to market the cover more intelligently.

This was the call made last year by Peter Dobie, underwriting manager at Allianz Cornhill Legal Protection (PM, 11 Dec 2003, p27). So has his call been heard?

Mr Dobie dislikes the main method by which CLE is distributed, whereby brokers generally have a scheme under which they market cover to commercial clients. They typically source bulk cover from insurers at net premium rates and add on as much commission as they think fit - usually buying cover at GBP25 a case and selling for GBP50.

This is more remunerative than the 10% commission they would get for selling commercial package policies with CLE automatically included. However, Mr Dobie questions how much cover an insurer can give for GBP25. "My concern," he warns, "is that some wordings don't provide the sort of coverage we ought to be giving - it's catastrophe cover with high excesses. If a claim is turned down, it's the broker who gets the stick."

Sizeable differences

He concedes that it is appropriate to sell standard basic cover to small businesses, such as corner shops, but for the medium end of the small-to-medium sector he recommends a risk-management-led approach, backed by insurance. ACLP is currently running a pilot programme with brokers to sell such a service at GBP250 to GBP500 a case, with roll-out planned later this year or early in 2005.