Three insurance companies announced significant moves into the legal services market in April after sealing alternative business structure (ABS) joint ventures with law firms.
The Solicitors Regulation Authority (SRA) granted Admiral, Ageas and RAC ABS licences to extend their services beyond insurance to provide legal services for customers making no-fault personal injury claims.
Ageas Law started trading on 8 April after receiving SRA approval at the end of March. The insurer, which has around eight million UK policyholders, has struck a groundbreaking five-year partnership deal with Cardiff-based personal injury law firm NewLaw Solicitors.
Elsewhere, Admiral entered the legal market via two ABS joint ventures, with Bristol-based Lyons Davidson and Cardiff’s Cordner Lewis. Both licences took effect on 1 May.
The Lyons Davidson agreement creates Admiral Law, providing legal advice to Admiral’s customers, while the Cordner Lewis partnership will operate as BDE Law and will service Admiral’s other brands: Bell, Diamond and elephant.co.uk.
‘ABSs are subject to economics being very challenging because you’re locking a law firm in very squarely.’
David Jabbari, Pannone
Meanwhile, at the beginning of April motoring giant RAC paved the way for its entry to the legal market by agreeing a deal for Quindell Portfolio to manage all before-the-event legal expenses work generated by RAC’s motor book in a deal covering a potential £500m of motor claims annually.
AIM-listed Quindell announced plans to launch an ABS in January last year, following its £20m acquisition of Liverpool personal injury law firm Silverbeck Rymer.
RAC commercial director, Kerry Michael, said: ‘What we like about Quindell is that they can bring together a number of elements of the supply chain, which means they are able to drive efficiency.
‘It helps everybody: our members can get their claims resolved earlier, both Quindell and we minimise our costs because the quicker claims are dealt with the cheaper the cost. Finally, it is cheaper for the insurer.’
Philip Dicken, strategic partnerships director at NewLaw, added: ‘The partnership will provide Ageas customers with an integrated claims service, improving the overall customer proposition, at the point when a customer may need to claim for personal injury.’
The deals are among the first of their kind in the post-Legal Services Act landscape that respond to Jackson’s civil litigation reforms, which came into effect on 1 April and included the banning of personal injury referral fees.
Tie-ups between insurance companies and law firms have been long expected as a likely side effect of these reforms. Pannone partner and executive board member David Jabbari said that these alliances are a way for firms that specialise in personal injury claims work to weather the ban, which is likely to reduce the volume of work they receive.
‘For those firms that were dependent on high-volume motor claims, this is quite a big shift. It’s the only route to the market really, the only way of getting hold of a significant volume of claims,’ said Jabbari.
‘I believe ABSs are subject to economics being very challenging because you’re locking a law firm in very squarely with a particular insurance company. However, they are likely to get a significant volume of claims so it is the remunerative thing to do.’
Last month, the AA also applied for a licence to become an ABS, following news that Saga – which merged with the AA in 2007 – has launched a legal services arm for over-50s. Direct Line has also signalled its intention to become an ABS once it has finalised its separation from The Royal Bank of Scotland.
Francesca Fanshawe