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

  • 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 cyber attacks: 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 pay-outs 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, who 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.
  • Telematics also allows insurers to have flexible insurance policies that adjusts fees and premiums based on the amount of miles the car drives.
  • 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 to 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 EU's Solvency II directive – aimed at harmonising EU insurance regulations to enhance consumer protection – was revamped in March 2019. The directive has a major impact on the insurance industry. Recent changes make it much easier for insurers to give long-term capital financing, and help in investing in equity and private debt.
  • 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. However, from August 2019, people can no longer make any claims – cue the sound of insurers and automated call recipients alike sighing with relief.
  • The increase in celebrity scandal in recent years has led to a rise in celebrity ‘disgrace’ insurance, giving companies a pay-out when their beloved stars get cancelled. The pay-outs could cover re-creating materials the celebrity appears in and reimbursing the cost of the celebrity’s contract.
  • In July 2018 the European Insurance and Occupational Pensions Authority launched an investigation into travel insurance and market-wide issues with consumer protection. The industry had already come under fire from the UK's Financial Conduct Authority when it revealed that more than 15 million people suffering from long-term illnesses felt 'poorly served' by travel insurance providers.
  • Reinsurer Munich Re predicts that the ongoing trend of the insurance industry growing more slowly than the economy as a whole will continue going into 2020. Emerging Asian markets are the fastest growth region for insurance, helping in part to alleviate issues caused by the bleak state of the economy.
  • With Brexit negotiations seemingly having stalled and a no-deal crash-out looking increasingly likely at the time of going to print, insurers wait with bated breath to see how the dust settles. Financial services insurers could potentially see pay-out activity skyrocket in the case of a no-deal Brexit.