Insurance

In a nutshell

Insurance is the practice of hedging against financial risk; the practice and its fallout require a lot of legal work. Insurance and reinsurance (even insurers are vulnerable to financial risk and they transfer part of their risk on to reinsurers) are practised by a significant number of specialist law firms and general commercial outfits across the UK. Insurance can be split into many sub-specialisms (see below), and firms may offer all or some of these services. Personal injury and clinical negligence (including public liability, employers' liability, accident-at-work claims etc) are also insurance-related practice areas. Maritime insurance was the first type to exist: read our practice area overview on shipping law for more.

It's possible to insure pretty much anything against almost any eventuality. Put differently, insurance is taken out to cover risks including human error, accidents and natural disasters. The most common types of insurance which lawyers deal with are: insurance against the destruction of tangible assets (eg property); insurance against the loss of intangible assets (eg revenue streams); and insurance against mistakes made by professionals (professional indemnity – the insurance-related bit of professional negligence). Insurance lawyers work on cases related to property damage, product liability, fraud, insolvency, director's liabilities (D&O), aviation, business interruption, mortgage losses, political events, technology, energy, environment, construction, finance... the list goes on. Disputes arise between the insured policyholder and the insurer; between the insured plus the insurer and another party; or between the insurer and the reinsurer.

Some lawyers specialise in the transactional aspects of the insurance industry, advising on tax, regulations, restructurings, drafting insurance policies, and M&A activity between insurance companies.

Insurance

What lawyers do


Professional indemnity

  • Represent professionals accused of malpractice and their insurers. The professions most often affected include engineers, architects, surveyors, accountants, brokers, financial advisers and solicitors as well as GPs, dentists, surgeons etc.
  • Investigate a claim, assess its authenticity and look into the coverage of a given insurance policy to determine an insurer's degree of liability.
  • Take advice from experts on professional conduct.
  • Draft letters in response to claims.
  • Prepare documents for court or out-of-court settlements.
  • Attend pre-trial hearings, case management conferences and trials if a case goes to court.
  • Attend joint-settlement meetings, arbitrations or mediations in out-of-court cases.

Commercial insurance disputes

  • Work on claims related to things as varied as properties damaged by flood or fires, oil rigs destroyed by hurricanes, or gold mines nationalised by socialist governments.
  • Work on disputes between insurers and the insured over insurance payouts and what insurance coverage consists of, or act for the insurer and the insured together in litigation with a third party.
  • Assess coverage and the insurer's liability.
  • Interview witnesses to find out how events occurred.
  • Value the claim and build up the case for what the client feels is an adequate settlement.
  • Attend court or mediations/arbitrations in order to come to a settlement.

Transactions

  • Broadly similar to the work of a general transactional lawyer. There are extra rules and regulations governing insurance transactions which lawyers need to take into account.

Realities of the job

  • While several legal practice areas fall under the insurance umbrella, the insurance industry itself is a distinct, single block within the City and the UK as a whole. There are a few big well-known insurance companies out there, but over 400 are registered with the famous insurance market Lloyd's of London.
  • London is the global centre for insurance and reinsurance and has been ever since Lloyd's of London was founded over 200 years ago. The industry is extremely well established and has its own rules, traditions and obscure terminology. Businesses based overseas will often be insured with a London firm, and the biggest disputes often have an international angle to them.
  • The insurance industry has a reputation for being a bit dull; however, the legal side kicks in when calamities occur, making it quite eventful, as any 'wet' shipping lawyer will tell you. It is also home to plenty of colourful characters and big companies organise many events, lectures and conferences for like-minded insurance-o-philes to rub shoulders.
  • Insurance is a complex and technical area and insurance policies are not the lightest reading material you'll ever come across. Stints in insurance seats are challenging for trainees, even those who have taken an insurance law elective on the LPC.
  • Insurance lawyers are known for their precise and fastidious working style. Good organisational skills are crucial, because lawyers are often dealing with a host of claims at various different stages. There are often daily deadlines and clients need to be kept constantly informed.
  • Lawyers have to pay special attention to potentially fraudulent claims or parts of claims.
  • Insurance cases range from huge international disputes to small local squabbles. Trainees might run a small case themselves, but only work on a component of a large high-value dispute. Lower-value work is usually done by small or mid-size regional and national firms, while the largest disputes are the preserve of City outfits.
  • Many firms regularly act for both insurance companies and insured policyholders. There is a trend towards firms specialising in either policyholder or insurer work.
  • The insurance industry is regulated by the Financial Conduct Authority.

Current issues

October 2020

  • Many consumers have been left in indefinite uncertainty regarding their travel insurance. With destinations being taken on and off the quarantine list unpredictably, consumers and insurers alike are finding claims difficult to make or assess.
  • Care homes have seen their insurance premiums rise dramatically, sometimes almost tenfold, in light of the Covid-19 crisis, with many fearing the increase could put them out of business. Care England has called on the UK government to step in and help out, but no scheme had been announced by the time we went to press.
  • The unprecedented number of unfortunate excess deaths in such a short space of time has led to a massive rise in life insurance payouts, with £90 million being paid from 1 March to 31 May 2020 alone.
  • To combat lockdown and social distancing measures, many establishments and eateries have changed their layouts and business plans to adapt to the current climate. Similarly, many food manufacturers have turned their hand to helping out for the greater good, such as BrewDog using its factories to produce hand sanitiser in April 2020. However, companies could find themselves in breach of their insurance policies if they stray too far from the path, making it difficult for them to get cover or payouts in the future.
  • Though Covid-19 initially seemed to be a nightmare for the insurance industry, investors have predicted there are long-term gains to be made by insurers. Reinsurance broker Willis Re estimated a total of $13 billion was invested into insurance companies in the first six months or so of the pandemic. The thinking behind this? Covid-19 can be used as justification for hiking up new policy prices, swelling insurance company profits once the virus begins to come under control and payouts decrease.
  • New risks to insure against are surfacing all the time: lately, insuring companies against cyber attacks has gathered steam. However, this type of insurance sometimes doesn’t protect against some of the worst effects of data breaches and hacking efforts: declines in share price; regulatory compliance problems; and the company in question getting a sticky bad rep.
  • In 2019, the UK government shook up what the insurer’s role is in paying out after an accident. Good news for laypeople – the lump sum payouts are now higher. However, it’s bad news for insurers, who are now forced to give out much larger amounts of money – many have speculated that their premiums will rise as a result. This will also affect personal injury, clinical negligence, employment and many other areas of law in which companies are liable for accidents.
  • Technology is affecting the way that insurance is bought and sold. Digital servicing has increased the demand by customers for immediate servicing of their needs, with young people in particular expecting instantaneous communication from insurers when they're making a claim.
  • Telematics is a growing area in car insurance. A device in a car can track the driver's behaviour and send that info to the insurance company, which will charge premiums accordingly based on that driver's risk of accident. Many leading auto insurers in the UK are now using ‘black box’ technologies, including Admiral, Hastings Direct, Direct Line, Co-op, Tesco and the RAC. Some research has found telematics has also been part of a decline in RTAs for those using it – also good news for insurers.
  • The insurance market is also being reshaped by new players – in 2017 Amazon launched its 'Protect' insurance offering to safeguard customers against issues arising from the purchases they make on the site. Previously a smaller presence in the UK, Allianz recently completed two acquisitions that has catapulted it into being one of the market's biggest players: they gobbled up Legal & General’s insurance branch and over 50% of LV’s insurance practice too.
  • The scandal of mis-sold payment protection insurance (PPI) has dragged on for years and continues to generate headlines; the industry has already shelled out £40 billion in compensation. Some claims date back to the 1980s, making compound interest a significant factor. August 2019 saw the supposed final day people could no longer make any claims – though in 2020, new court rulings have opened the door for even more new claims.
  • The increase in celebrity scandal in recent years has led to a rise in celebrity ‘disgrace’ insurance, giving companies a payout when their beloved stars get cancelled. The payouts could cover re-creating materials the celebrity appears in and reimbursing the cost of the celebrity’s contract.