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Sale of services: clarity on legal insurers & unions

Comment 4th February 2016

I want two pieces of clarity.

  1. The same consumer protection service should cover legal insurers & the legal insurance work of trades unions.  At the moment if you ring Consumer Direct about a rip-off by a trades union, they tell you to try the Financial Services Authority. Try them and they say try the Certification Office. I pressed my point on the phone so the boss of the helpline office rang me back to say that this was not a political thing; unions do other things apart from legal insurance, and that's the reasoning "like getting you cheap food at the canteen" he said. But a legal insurere that also offers human resources advice or is bundled with the services of Cardsave or the Federation of Small Businesses is covered. Likewise unions have no trouble registering with the FSA for their work flogging financial services to the mailing list, but don't want to register as legal insurers. On to the Cerfication Office: "complaints regarding a union’s failure to represent a member adequately, or at all" are not covered. That's what they say on their web site.
  2. Legal insurers who use no-win no-fee lawyers should be transparent about it. At the moment some legal insurers pay no insurance premium tax: all the money goes to the broker. They charge no-win no-fee lawyers such as Shoesmiths referral fees, accoding to the company quoted in an Observer article: "It's the only source of income we get", said someone at DAS legal insurance.

    Now, if the whole edifice of a legal insurance company is funded by no-win no-fee lawyers, most consumers would cancel their subscription and think of another way to get such lawyers. They would be right to do so. Apart from a murkey hope that a legal firm can use cross-subsidise cases there is no excuse for running such a service and a murkey hope is no hope at all.

Why does this matter?

Insured people and members of unions are let-down when they try to sue employers.

Employers complain too. Many smaller ones are concentrating on whatever it is they do – then this hits them. Like employees, they sometimes come up against feckless or machiavellian people who they think they shouldn't have to deal with after the sacking, and with their best efforts the case can go against them in a way that might be wrong and cost time or money. I've suggested on this site a system of optional juries in emmployment tribunals which might do something to help, in some special cases.

But larger & public-funded employers have the temptation to move money between budgets in a way that isn't accounted for, cutting services to pay for a barrester to go a pre-hearing review at an employment tribunal for example. I don't know if services are cut to pay for this but the temptation is there and I did meet a barrester at the pre-hearing review for an employment tribunal against a public funded employer. Also, certain councils are a target for legal cases in a way that the private sector is not. No parent would dream of suiing a private school for falling over on sports day, but someone was recorded on TV as threatening that against a Lambeth Council school in a recent program about no-win no-fee lawyers. So even a well-run public service is under more pressure to divert budgets.

Insured people and union members have only their own budgets to raid; they cannot raid a budget of other peoples' money.

Information about dissapointed litigents is on a site I wrote to vent frustration. It reads like that. It is about trades unions rather than legal insurers because I dealt with a trades union. But there are plenty of links on to show how the system doesn't work as things stand now: a Coventry University research project for the National Association of Citizen's Advice Bureaux for example. Or the web site of the late Frank Field who ran a workplace bullying helpline. He quoted other sources for similar information which he listed as "DAWN, OXBOW, Andrea Adams Trust and Freedom to Care".

This is what I could be decided at Whitehall

The Financial Service Authority should request supervision of the insurance work of trades unions, with changes of law to allow this if needed. Unions will say which law it is if pressed.

The Financial Services Authority should draw-up a Key Facts template for descibing to subscribers what a legal insurer does and what proportion of their work is funded by the subscriptions, rather than no-win no-fee. I think this is important because the messier cases against machiavellis often aren't profitable in terms of work put-in and money won to a lawyer.

At this point some very detailed advice and suggestions would explode-in to the office from political rivals and vested interests, journalists and everyone really.

Please light the blue touchpaper and wait for the result.

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