On 1st July 2022, ACSO was pleased to welcome to our annual ACSO/Defaqto roundtable many of our legal expenses insurance (LEI) and legal services members and contacts. The purpose of the meeting was to discuss Defaqto's Star Ratings for 2023, to ensure they consider current market insights and the changing market dynamics.
ACSO is committed to improving customer outcomes in the civil justice arena and to improve market collaboration between our members and other key stakeholders on common areas of interest. The reason for our relationship with Defaqto is that its Star Ratings have an important role to play in improving transparency when consumers seek to buy LEI and thereby improving levels of quality and ultimately competition in the sector.
The roundtable was an excellent opportunity for Defaqto to explain how its rating system works. Discussions also revolved around how the ratings could be formulated to better help consumers, such as assessing service levels as well as quality and creating dynamic ratings bespoke to individual customers.
Defaqto uses data analytics to research and compare different LEI products and thus can play an important role in the consumer decision-making process prior to taking out an insurance product that may be a benefit if they need access to support on a civil justice matter.
It is of concern that almost identical LEI products underwritten by the same companies can be available on the market under different brands at widely disparate prices. Moreover, there is some evidence of insurers removing certain features of cover in the face of pressure on reducing prices in the context of the cost-of-living crisis.
Whether this represents cost-cutting - or fair value to consumers so they do not have to buy items they are not likely to need - remains to be seen. While efforts to help consumers during this difficult time is welcome, any race to the bottom in pricing risks undermining the consumer position if they do need to make claims under their LEI policies.
The new FCA consumer duties that will be introduced in April 2023 puts the onus on providers to ensure good consumer outcomes, rather than merely avoiding poor outcomes. This may translate to more consistent LEI policy pricing - time will tell.
In the meantime, ACSO is pleased to have opened this channel of communication between Defaqto and our members who have been invited to put their suggestions to Defaqto for how to further improve their ratings criteria. Our hope is that better star ratings for LEI products will enable consumers to make better-informed decisions.
Author: Alex Diaz, Trainee Solicitor at Lyons Davidson Solicitors and ACSO secondee.