Use LEI

ARAG has a socially minded solution for businesses and individuals who need access to the legal system but don’t have the capital to pay lawyers’ fees

Gale uses an example of someone being harassed or bullied at work. “If you have to defend or pursue that, it will cost you,” she says.

“Under our policy you would have access not only to pursue your legal rights, but you'd also have access to a helpline which will give you legal assistance without it actually becoming a claim.”

Gale says many businesses in Australia would spend $20,000 seeking legal advice and taking action through an industrial relations lawyer – but ARAG Business policies offer limits of indemnity ranging between $100,000 and $150,000, with aggregates of $250,000 for as little as $400-$500 in premiums.

Common areas in which businesses in Australia face legal disputes are work, health and safety investigations; compliance and regulation; and tax and employment-related issues. Another area in which LEI can make a difference to SMEs is contract disputes, which would normally require the services of a lawyer to pursue outstanding or unpaid monies. Providing a debt recovery process and a legal option (when all other options are exhausted) is key to all SMEs.

Likewise, most SMEs are more concerned about making their next payroll than setting aside funds for a possible legal dispute.

The resulting inequity due to rights not being upheld is what LEI aims to fix – social justice is a major driver for ARAG.

ARAG is committed to educating brokers on the importance of arming their clients with LEI.

“Our whole ethos is about providing affordable access to justice,” Gale says. “Our founding principle is access to justice and providing an insurance cover that ensures that every individual or business has the right to assert their legal rights, not just those that can afford it.

“I would challenge brokers to have a risk management conversation with all their clients on how much they spend, not only in dollars but time on legal matters, debt recovery, employment disputes, and see how this weighs up against taking out a policy.”

Aside from the legal helpline, an LEI policy also allows policyholders unlimited access to a document centre that contains material to help with everything from tax audits to writing a will. It includes employment and tenancy agreements, forms related to debt collection, standard service contracts, and information on other compliance and regulation matters.

“It's really important for us to make it affordable, accessible and have a real tangible benefit not only to the business but to the social landscape to ensure that we're covering [cases that] would normally be disadvantaged.”

Big in Europe, Australia a growth opportunity

LEI began in France, was picked up by Germany and is now a major social good in many European countries. In Germany, over 40% of citizens hold legal expense cover as a standalone policy, while in Sweden the level is closer to 90%.

It’s no coincidence that the World Justice Project ranks these countries sixth and fourth respectively in its Rule of Law Index. Australia currently ranks 13th, with a score that has slipped over the last several years.

Gale says the main reason LEI isn’t more widely used in Australia appears to be cultural. Australians have a ‘she’ll be right’ attitude and a trusting mentality that leaves much to chance.

“What we want to do is educate around basic business or everyday-life situations that we don't talk about, we don't hear about, and people just sweep under the carpet, or just pay out. And what we want to do is try and change that narrative.”

The 2020s are shaping up to be different to the past, as even Australians are realising that once-unlikely risks need to be mitigated ahead of the fact, rather than simply waiting for the next crisis to arrive.

“What we're seeing now with insurance is that, through the major catastrophes that we've seen over the last five years particularly, Australians are becoming much more aware of the risks that they take by not insuring,” Gale says.

She points to other types of insurance that were once considered niche, such as management liability and cyber insurance. “We're going to see the same evolution with legal expense insurance,” she says.

ARAG’s entry to the Australian market was unfortunately timed to coincide with the arrival of COVID-19, but Gale is continuing to put her faith in the broker channel.

“We've made a strategic decision as an organisation to maintain an intermediary model. We think it's very important that people, individuals and businesses have access to expert advice when deciding on insurances,” she says.

“Whilst we're experts at legal expense, we're not experts at giving financial advice or guidance on what insurances they should carry, so we work with our broker partners in the market to ensure that they are educated on LEI and the benefits and can start having good conversations as part of their risk management programs with their clients.”

That faith may finally be starting to pay off with market penetration increasing 300% over the last 12 months.

“We’re confident that the brand awareness, and the education that we’ve been doing with our broker partners, is starting to really resonate,” Gale says. “This is something that we believe everyone should have as part of their insurance program.”