Every insurance broker wants to add value to their clients so that they can cement their business relationships. At the same time, they also need to generate sustainable revenue streams. Third party litigation funding offers you a golden opportunity to do both. It is revolutionising the way businesses can pursue legal claims, and minimising the risks that have traditionally been associated with litigation. As business disputes arise, brokers have an unrivalled opportunity to reach out and help their clients. Here are just three ways in which litigation funding can help insurance brokers.
1. Tell the client ‘you’re covered’
Few things are more worrying to a business than litigation. It is almost always full of risk and uncertainty. It is hardly surprising that when faced with it, the first phone call a business owner makes is to their insurance broker to check whether they’re covered. This is a potentially difficult situation for brokers as it’s rare for any commercial insurance policy to cover bringing a legal claim (where legal cover exists, this is generally for defending a claim) No one likes saying ‘no’ to a client, so the last thing a broker wants is to inform a client that they aren’t protected.
However, thanks to innovation in the litigation space, you may not need to. When a worried client makes such an approach you can now refer them to a specialist in third party funding such as Annecto Legal, a UK-wide service helping businesses realise the value of their commercial litigation claims. Through its network of legal experts, it can help businesses get advice on a potential case, provide backing for their claim, and enable them to pursue it with minimal costs and risk.
To understand how drastically litigation funding transforms the risk, compare a traditionally funded claim to one funded under either a contingency or “no win, no fee” model. Until very recently, you had to pay lawyers by expensive hourly rates regardless of the result. For example, you could realistically expect to spend £80,000 on legal fees for a claim valued at £200,000, and if you were ultimately unsuccessful, then you would lose not only your £80,000, but you’d also have to pay your opponent’s costs (likely another £80,000), so you have risked £160,000 to recover £200,000.
Under Annecto Legal’s model, businesses can invest very small amounts, or even nothing at all, into their claim, confident that if they lose they won’t have to pay anything and if they win they would still receive a substantial award. The client would attain this reward with scarcely any risk – and would value their broker for having suggested this option. As a broker, you would be able to achieve a new revenue stream through Annecto Legal’s referral fee.
2. Give your client the chance to right old wrongs
The lack of insurance cover for pursuing claims, combined with the inherent financial risk of litigation, means that many businesses have been powerless against past injustices. For example, they may have suffered frequent breaches of contract, or been unable to recover their debts. This is not merely conjecture: an Opinion Matters study released last October revealed that the average UK business has lost out on £172,000 over the past five years through unpursued valid claims.
Third party funding allows brokers to offer commercial clients a hugely valuable service: the chance to remedy these past wrongs and recover significant funds which can be reinvested into their business. As long as the event that caused the claim took place within the time allowed by the Limitation Act (normally within the last six years for most business claims), your client can still pursue that claim.
3. You can draw on a wider range of products
As a broker, you want to present as wide a range of insurance products as possible to your clients. The broker with an informed portfolio will be in the best position to help clients properly manage risks and allocate resources. Traditionally, the insurance market has suffered from a deficiency when it comes to litigation funding: while it has been quick to offer “defensive” policies, which protect businesses from the threats of others’ claims, it hasn’t been good at supporting businesses pursue their own claims. Now, with Annecto Legal’s proposition, this is all changing. Annecto Legal’s expert insurance and legal network are developing specific policies to provide brokers with new opportunities to assist commercial clients. Soon you will be able to promote policies that support future claims, providing your clients with an invaluable service and giving yourself another way of helping the businesses you work with.
For all of these reasons, litigation funding really offers an opportunity that no broker can afford to ignore.