A recent report by MSA Research suggesting that “intense competition” in the Canadian legal expense insurance market is “hurting results” is news to one of the major players selling the product.
Barbara Haynes, CEO of DAS Canada, which started selling legal expense insurance in Canada two years ago, said she is not seeing the same thing as MSA Research.
“This article said ‘intense competition is now hurting results,’” Haynes said to Insurance Business. “And I thought: ‘Really?’
“What we find is that, when we are quoting on something, 95 times out of 100 we are the only insurer presenting a legal expenses insurance option. I view it as the competition is more for a share of the customer’s wallet out of their insurance spend.”
In other words, if a customer is looking to spend $10,000 on insurance, a broker might say: ‘By the way, here is a product – legal expense insurance – that may have real value for you.’ The competition would consist in convincing the broker’s client to pay the extra dollars for the legal expense insurance product.
Legal expense insurance provides coverage for the legal fees and expenses incurred by a lawyer on specified matters, including employment disputes, litigation, disciplinary actions, human rights complaints and criminal charges. DAS Canada covers legal expenses incurred by homeowners, businesses and even drivers (i.e. legal costs related to traffic tickets).
Haynes said it’s difficult to tell how much business legal expense insurance is doing now, because one of the market players, Lloyd’s of London, does not report its results for legal expense insurance. As MSA Research notes, Intact Insurance and La Capitale also sell legal expense insurance. MSA reports that standalone legal expense insurance accounted for slightly more than $6 million in nine months.
“I would say it’s somewhere between $10 million and $20 million at the moment,” Haynes estimated.
Haynes projects that the market in Canada for legal expense insurance has the potential to write up to $500 million. For brokers, that means potential commission revenue of up to $100 million.
Haynes based her market projections on a study of the per capita spend on legal expense insurance in Europe. DAS Canada figures show an average per capita spend on legal expense insurance in Europe of 12 euros per head in 2007-08.
Canadians are currently spending an average of 50 cents per capita on legal expense insurance, a figure projected to top out at $15 per capita. The challenge in realizing the potential is to educate brokers and clients as to what the product does, Haynes said.
“Really, the challenge to me is lack of awareness and lack of understanding through our distributors and customers on legal expense insurance and why it’s a good idea,” Haynes said. “They might think: ‘Don’t I have coverage for this under my liability policy?’ No they don’t, because there’s really not an overlap. It’s just a question of understanding what it is and what the benefits may be.”
