Why Motor Legal Protection is a rip off and the free alternative

I have asked Lee Jones from Free Motor Legal Ltd to explain Motor Legal Protection, how it works (a sham) and some more about his site. Read on and save yourself £30 a year.

What is motor legal protection?

Motor legal protection (MLP) is also known as legal expenses insurance. In the UK, policies covering motor legal expenses insurance are usually sold alongside the main motor insurance policy as an “add-on”. The typical premium is around £30.00.

The general purpose of the policies is to allow access to legal services and cover the fees of the appointed lawyers after a collision which was not the fault of the policyholder in order to recover any losses and expenses and/or compensation for personal injuries.

The policyholder does not get a choice of the lawyers, these will be appointed by the legal expenses insurer and, in order to receive any advice or assistance, the policyholder must have a claim with “reasonable prospects of success”. In other words you need to have a better than 50% chance of succeeding with your claim, otherwise assistance under the policy will be denied.

So where is the sham?

Well it starts with the cost of the policies

As advised, they generally retail at around £30.00, but the actual net cost to the insurer, broker or price comparison site you are buying the cover from can be as low as £0.50p, yes 50 pence! It has even been known for some brokers and insurers to get the underwriting for free as the service providers used will pay for the underwriting in order to secure the deal. But let us assume the cost is 50p per policy. When that is retailed to the customer for £30.00, it amounts to a mark-up of 6000%. Now that is a pretty ridiculous profit margin for any business, yet we allegedly have a fiercely competitive insurance industry which favours the consumer according to the trade body for UK insurers, the Association of British Insurers.

The fact is, aside from a small handful of standalone providers who retail the policies at a lower amount, the premium of around £30 per policy has become somewhat standard and few, if any insurers want to cut each other’s throats with a race to the bottom when it comes to the price of the add-ons. They can often make more profit from the sale of the add-ons than the actual motor insurance policy itself.

decorated car with added parts

Next are the restrictions on the policies…

which cause households and businesses with more than one vehicle to have to purchase Motor Legal Protection several times over. The general policy wording states that assistance will only be given for claims arising out of the use of the vehicle insured under the main motor policy. So an example would be a household with say 2 vehicles. Husband has a car insured in his name with the wife as a named driver on his policy. He purchases legal expenses cover on top of his policy. The wife has her own car and insures it in her name with the husband as a named driver, but she does not take out legal cover.

If the wife had a non-fault accident in her own vehicle, she could not use the husband’s legal cover to seek recovery of any losses or expenses or claim any compensation if she suffered injury. She would have to either try and claim for these losses by herself, or end up instructing a solicitor under a no win- no fee agreement, which would see her most likely lose 25% of any awarded compensation to the lawyer in “success fees”.

So the insurance industry has this area well and truly sewn up when it comes to households and businesses with more than one vehicle needing to buy this product several times over.

For private cars alone, excluding motorcycles and vans, using Department of Transport figures, there are over 30 million registered cars on the UK roads. For the owners of those vehicles to have motor legal protection covering each vehicle at a cost of £30.00 each, that amounts to £900 Million in premiums! Did we mention that 6000% mark-up? Plus if you add on motorcyclists and van/ light commercial vehicles, the figures are staggering, well over £1billion in premiums.

blue beetle car

OK so the mark-up is a bit rich, but you said it was all a sham

Well yes it is really, because working behind the scenes for 20 years dealing with motor claims litigation for both insurers and independent solicitors has revealed that the policies never truly get “used” or seldom pay out any legal fees and disbursements.

What this means is that the insurers do very little other than earn money from selling the policy, but they get an extra slice of income if the policyholder has a non-fault collision resulting in the need for a replacement vehicle to be provided (credit hire car) or if they suffer personal injury and make a compensation claim.

The reason for this is that for decades, legal expenses policies have just been used as “claims capture mechanisms” in order to refer customers needing vehicle repairs and hire to credit hire companies and for personal injury claims to be referred to a panel of law firms. When this happens money changes hands in the form of referral fees previously and now “marketing fees” or profit shares. These get passed back to the insurer, broker or price comparison site you purchased the policy from. So a nice little earner selling the customer a policy at a ridiculous mark up and then another earner if the customer calls them after a non-fault accident.

The legal expenses insurer can then just sit back and do nothing as the law firms who are on their panel of approved firms have usually agreed never to claim against the policy, even when a case has been lost and they are out of pocket for fees and expenses. Put simply, for the lawyers, the good cases cover the cost of the ones which do not succeed.

This all happens under the veil of the clause in the legal expenses policy which states that cases must have “reasonable prospects of success”. This allows the law firms to vet cases they wish to take forwards and those which they do not. If the case looks like it is lacking in evidence or prospects of success, the law firm can just use the “reasonable prospects” clause to state that an indemnity under the legal policy will not be granted and therefore they do not take the case forwards. On cases which succeed, the lawyers get paid their fees by the insurance company of the at-fault third party motorist.

So this leaves the legal expenses insurer in a situation where they do not need to pay any legal fees, despite the policies often providing “£100’000 of legal expenses costs” because, if the case is no good the lawyers will just not take it forwards and therefore no legal fees will arise. On the cases they win, they will be paid by the third party insurance company, again causing no legal fees to be paid by the legal expenses insurer. If the appointed lawyers lose a case, they have often agreed not to bother the legal expenses insurer and therefore just have to absorb the costs. Either way, there are no panel lawyers knocking on the door of the legal expenses insurer for payment of costs.

Some years ago, the Financial Conduct Authority wished to explore more ways for customers to see the value of the “add-on” insurance products they often purchase, such as motor legal protection. One suggestion was for such insurers to publish payment details of how much and often they had made payments under claims against their policies.

The mouthpiece for the UK insurance industry, The Association Of British Insurers (ABI) were quick to jump in and allege this would not show people the value of such policies and the FCA immediately backed down, duly issuing guidance for a very watered down selection of insurers providing cover for mobile phones to publish such information. Why was this?

Well, in our view, this was because it would quickly expose the racket that was motor legal expenses insurance by proving our experience that these policies cost the insurers almost nothing to underwrite, are sold at a vast mark up to the consumer and then rarely ever incur any financial outlay due to the law firms they instruct agreeing never to seek payment of any fees from them.

car text- How to protect yourself from the motor legal sham

Free Motor Legal Limited

On seeing how the industry really worked behind the scenes, I chose to do something about it and founded Free Motor Legal Ltd, providing British motorists with a free alternative to paying for motor legal protection.

The company was founded in 2012 and allows motorists in England, Scotland and Wales to register for free lifetime membership, shaving that extra £30 a year off their vehicle insurance costs, whilst providing the same basic assistance after a non-fault collision.

The membership is just tied to the member themselves, rather than operating around the use of just one vehicle, so households with more than one vehicle enjoy greater savings.

Free Motor Legal arrange for replacement vehicles and repairs to be carried out without the member needing to claim through their own insurance policy, avoiding the need for any excess to be paid as the costs of repairs and replacement vehicle hire are met by the insurers of the party at fault.

If other losses arise such as lost earnings, medication costs, travel expenses or compensation for personal injury, Free Motor Legal will arrange for one of their panel solicitors to be appointed and these losses pursued from the insurer of the at-fault third party. There is no deduction taken from the awarded losses and compensation and the costs are met by the insurers of the third party.

Like the paid for products offered by the insurance industry, Free Motor Legal Ltd do receive commission payments from some of their service providers, such as hire companies, but they do not charge their members £30 a year to simply pass their details onto lawyers and stand back.

Note from me! I’ve done it and you don’t even have to remember to renew! It’s there for life!

See How to save money on your car insurance for more ways to save.

Lee Jones

Lee Jones, aged 43 has been married 17 years to Michelle. They live in Norfolk with a dog and cat.  They relocated from York after Lee was diagnosed with Stage 4 Bowel cancer in Jan 2017 and is on long term palliative care.

Lee worked for law firms and major insurers  as a litigator since the early 90’s.  He started working in criminal law and was a police station adviser duly advising clients in police custody and assisting in Crown Court trials. He then worked for Norwich Union in their in-house legal dept in 1997 until 1999 defending claims against their policyholders. Thereafter he has worked for several Claimant law firms dealing with road accident claims since 1999 until setting up Free Motor Legal, after realising that he could help motorists gain the same services without needing to buy a motor legal protection policy.

Logo cartoon cow at a laptop of book cover. How to Complain: The Essential Consumer Guide to Getting Refunds, Redress and Results!

 

If you have any problems with car insurance or most other sectors GET THE BOOK! How To Complain: The ESSENTIAL Consumer Guide to Getting REFUNDS, Redress and RESULTS!

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Landing in court with Ryanair

Summer of 2018 sees Ryanair, CAA and AviationADR in a flying shame of failures.

Ryanair aeroplane in sky

Ryanair failures

The Summer of 2018, like the Summer before, has seen Ryanair failing passengers trying to get to weddings, funerals, business meetings and, of course, holidays. This year, it seems that Ryanair is even trying to beat last year’s number of cancellations.

In 2015 the Civil Aviation Authority (CAA) launched enforcement action against Ryanair. This action followed a review by the regulator that found Ryanair was not complying fully with European consumer law designed to support passengers following flight disruption. Ryanair was required to make policy changes or face the prospect of further enforcement steps leading to court action, if the airline remained non-compliant. Whilst it may have made policy changes “on paper” it appears to continue to flaunt them.

In 2017 the CAA launched enforcement action against Ryanair for persistently misleading passengers with inaccurate information regarding their rights in respect of its recent cancellations. This was after Ryanair repeatedly said it would not offer compensation for cancelled flights. The same is happening again, and although the CAA has issued a statement saying that Ryanair should be paying compensation, it has so far fallen short of taking enforcement action.

AviationADR failures

 

There are six different schemes authorised by the CAA to deal with airline complaints.  AviationADR and CEDR are the two main alternative dispute resolution (ADR) providers. AviationADR is the provider for Ryanair. So, those passengers not getting any joy from Ryanair could take their case to AviationADR. However…..

Which? articles

Earlier in the year Which? attempted to obtain the data on the number of complaints resolved by AviationADR and CEDR through a Freedom of Information Act request to the CAA. I requested the quarterly reports and was also refused. However, my FoI Internal Review request on this decision was successful. Which? reported Fewer than 500 Ryanair passengers awarded compensation by complaints body in 2017.

“AviationADR received over 3,600 EU261 complaints about Ryanair in 2017. Only 496 passengers were awarded compensation. The vast majority of complaints were still outstanding at the end of year. In the first quarter of 2018 AviationADR received over 2,400 flight delay and cancellation complaints about Ryanair. In this time 282 passengers were awarded compensation and 98 were told they were entitled to nothing, leaving thousands still waiting for a decision.

For the first quarter of 2018 the figures are even worse. AviationADR received over 2,400 flight delay and cancellation complaints about Ryanair. In the same period just 282 passengers were awarded compensation and 98 were told they were entitled to nothing, meaning thousands were still waiting for a decision.”

In addition, “Aviation ADR said that a ‘very large’ number of the remaining complaints were ‘put on hold’ because they had been submitted by claims-management companies, who are in dispute with Ryanair. It said: ‘Given the ongoing litigation between (claims solicitor) Bott & Co and Ryanair… the claims management companies have agreed that these claims should be put on hold pending the final outcome of the court case.’

Bott & Co doesn’t accept that it has ‘agreed’ that the claims should be put on hold. It says, ‘we felt that the claims should be looked at, however Aviation ADR have currently refused to do so, because Ryanair won’t deal with claims presented by solicitors.’ It confirmed that it had made about 100 claims through Aviation ADR in 2017, ‘but we never got a response on any of them.’ It also said that it had another 10,000 complaints it had been planning to send, ‘but they told us to wait because they wouldn’t consider the claims whilst Bott & Co v Ryanair was ongoing.’

Which? has previously raised concerns about AviationADR in Passengers still having to fight for flight delay compensation. This article outlined that The Retail Ombudsman (Details of reasons for the name change from TRO to various others can be found at The Retail Ombudsman is no more) was:

  • Committing an offence by even calling itself an ombudsman.
  • Wrongly implied in its 2015 annual report that Sainsbury’s and Tesco, as well as many other retailers, were members of its ADR scheme.
  • Allowed to call itself an ombudsman for more than a year by the Ombudsman Association (OA) before investigating. THE OA later issued a statement that The Retail Ombudsman ‘did not meet the OA’s membership criteria for independence, fairness, effectiveness, openness and transparency, and accountability’.

The Independent article

The Independent reported on AviationADR where a wrong decision had been made advising a passenger to claim against the airline with which she flew when Ryanair cancelled her flight. Not only that, it incorrectly advised her to claim against that airline, rather than against Ryanair! The airline was also an AviationADR member, so it would have been paid twice for essentially the same complaint!

Omnishambles reports

The two reports I co-authored with Marcus Williamson, ceoemail.com Editor, on the oversight of Ombudsmen and ADR providers, Ombudsman Omnishambles (OO) and More Ombudsman Omnishambles (MOO), heavily criticised the approval of Consumer Dispute Resolution Limited (CDRL), the company that runs the AviationADR scheme.

Delays in payment

Air India customer, Mukhtiar, is having problems getting the airline to pay the compensation he is owed.  He was told on 21 February 2018 that AviationADR had ordered Air India to pay up on his case but he’s still yet to receive anything. On the 26 June 2018 Mukhtiar asked AviationADR for an update. AviationADR said “I can confirm however that we are seeking further assistance from the CAA (Civil Aviation Authority) regarding this matter.” This begs the question: if AviationADR has to refer to the CAA for an issue of non-payment, just how effective is it? Six months later, as of 20 August 2018, Mukhtiar still does not have his money.

A spokesperson for the CAA said:

“The CAA maintains a regular dialogue with the UK ADR providers and is aware of only a relatively small number of cases of late payment of awards. The CAA itself receives a handful of complaints from consumers about late payment of awards. In the CAA’s view, this does not indicate that there is a systematic issue with the timeliness of the payment of awards resulting from ADR decisions. We will continue to monitor the situation closely.”

Ryanair comment regarding ADR

Ryanair was asked for the number of customers who have been paid out through AviationADR decisions and how many where the customer has come direct and Ryanair has made a decision in the customer’s favour. It was also asked how many cases for compensation it received in 2017and how many of those it awarded compensation and how many went to ADR. Ryanair said “We don’t break down our data on claims to that extent.”

Strike action

As regards the strike action, a spokesperson from Ryanair said “With regards to EU261 compensation for cancellations arising from strikes, our position has not changed: “Ryanair complies fully with EU261 legislation, under which no compensation is payable to customers when the (strike) delay/cancellation is beyond the airline’s control. If these strikes, by a tiny minority of Ryanair pilots, were within Ryanair’s control, there would have been no strikes and no cancellations.”

When asked for a comment regarding the strikes by cabin crew Ryanair refused to provide a comment.

The European Court of Justice ruled in the case of Helga Krüsemann and Others v TUIfly GmbH case, that a strike by the company’s employees are not “extraordinary circumstances”.

CAA

A spokesperson for the Civil Aviation Authority said:  “The ADR Regulations, which set out the rules to which approved ADR bodies must adhere, specifies that ADR providers must reach their decisions within 90 days from the receipt of the complete case file – and to report each year on the average time taken to resolve complaints. For the year up to March 2018, the two ADR providers reported an average time of 65 days to reach a decision, well below the 90 day threshold. We are aware that a small number of complaints do exceed the 90 day threshold, and indeed we receive a handful of complaints ourselves from consumers who have experienced a delay in their complaint being decided. We will continue to monitor this issue and to work with the ADR providers to ensure that complaints are dealt with in a timely manner.”

It is important to note, “90 days from the receipt of the complete case file”. This means that an airline could hold up the case indefinitely by never sending required documents! As far as the CAA is concerned the providers are doing ok even if an airline takes 5 months to send information!

A spokesperson for the CAA said:

“The CAA maintains a regular dialogue with the UK ADR providers and is aware of only a relatively small number of cases go over the 90 day time limit. The CAA itself receives a handful of complaints from consumers about the timeliness of ADR decision making. In the CAA’s view, this does not indicate that there is a systematic issue with the timeliness of ADR decision making. We will continue to monitor the situation closely.”

Trying to gain examples of monitoring has proven difficult. The CAA has been given copies of both the OO and MOO report and is aware of the OA and Which? criticism but has continued to approve AviationADR.

In February of this year the CAA said that  the average rate for consumer complaints being upheld by CEDR was 89% and for AviationADR  71%

If you have used ADR and not been paid out, contact the CAA  CEO.

What if you do not want to use AviationADR?

Having read the articles and documents you may not want to use AviationADR, so what do you do?

Do you need to show you have used ADR before you can go to court?

The Pre-Action Conduct guide, published by the Department of Justice, explains the conduct and steps courts would normally expect parties to take before commencing proceedings for particular types of civil claims.

This conduct states that litigation should be a last resort. The defendant and complainant should consider whether negotiation or ADR might enable them to settle their dispute without commencing proceedings. They should consider the possibility of reaching a settlement at all times throughout the process.

The court may decide that one or more parties (claimant or defendant) has failed to comply if s/he has unreasonably refused to use a form of ADR, or failed to respond to an invitation to do so.

If there has been a non-compliance that is not materially important then there’s no need for the court to do anything. But if there has been a non-compliance the court could pause or stop the proceedings until the party fulfils its duty under the pre-action conduct/practice direction. It is possible that if a claimant hasn’t tried ADR, the court could stop the case proceeding any further until the parties have used an ADR provider. The court could also apply sanctions.

The sanctions that could be applied (for any non-compliance with the protocol) cover the financial implications. The party at fault for non-compliance may have to pay the cost of proceedings, or part of the cost to the other party. This could be on an indemnity basis (which means that it might not be proportionate). If the claimant has been awarded money s/he may be awarded less interest than otherwise may have been the case. (If the defendant is at fault, s/he may be awarded a higher rate

I am not aware of any cases where someone has received sanctions as described above for not undertaking ADR. I would think the suitability of the ADR provider could provide grounds for your refusing to use that route.

Possible reasons for putting forward the case not to use ADR

The wording in the protocol clearly states that ADR should be considered. It does not say it must be taken. The Which? articles, the article in The Independent and the two reports go into a lot of detail about failures, delays in dealing with complaints, mistakes etc. It should be easily possible to argue that you have considered ADR in this case but for the following reasons:

1)    Details of the Which? articles

2)    Details of The Independent article

3)    The points from OO report that relate to AviationADR (The Retail Ombudsman/CDRL)

4)    The summary of the financial history of Dean Dunham’s companies provided in the MOO report

5)    The list of points in the MOO report which relate to AviationADR

6)    The minutes from the Ombudsman Association (reproduced in the MOO report) that show that CDRL lack the credentials to provide quality ADR.

7)    Examples of AviationADR not enforcing decisions to make airlines pay. Small claims court process made simple gives you an outline of what you need to know about the process.

I am not a lawyer and do not give legal advice. I give help and guidance and the above is just my opinion. However, I believe a court will understand if you feel that AviationADR would be unable to deal with your case satisfactorily, given the background information shown here!

What to do when your flight is delayed or cancelled – the full guide

All you need to know about booking/complaining about holidays/flights

Look East interviews Ryanair CCO and Helen Dewdney

LookEast Evening and Late News 23/08/18. Two interviews with me regarding the current situation and one with the Ryanair Chief Commercial Officer David O’Brien. Looks at strikes, rights, bounced cheques and baggage issues.

 

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