Building momentum towards fairer legal access

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Getting to BAM – how ARAG Australia plans to help businesses and individuals everywhere reach an LEI epiphany

– Renko Dirksen, speaker of the board of ARAG SE, in his opening statement at the Access to Justice Conference 2024

ARAG Australia is a part of the ARAG SE Group. Operating for 90 years and now in 19 countries, ARAG is recognised as the number one legal insurer worldwide with over 12 million satisfied customers. ARAG Australia offers small and medium-sized business owners, sole traders, tradespeople, individuals and families, residential landlords and private boat owners access to the legal system by covering legal costs for the defence or pursuit of insured events at a fraction of the cost of using a lawyer, significantly reducing risk exposure.

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How Australians handle legal problems

Strongly agree - able to get all help needed

“ARAG’s goal in the next two to three years is to see [LEI] very much as a mainstream product offering”

Natasha Gale, ARAG Australia

NATASHA GALE’S plumber got more than he bargained for when he was on a callout to install a new dishwasher at the chief executive of ARAG Australia’s house. Plumbers and other tradies often find themselves chasing clients for outstanding invoices for services or goods supplied, and Gale’s plumber was no exception. “If you’ve tried all the normal avenues to recover that debt [without success], and the debt remains in dispute, then what you have is a contract dispute,” Gale says – something that most people think requires resolution through expensive legal advice from a lawyer. When Gale mentioned that ARAG was in the business of providing Australians with affordable and easy access to legal services at a cost much lower than normal channels via legal expense insurance (LEI), her plumber had what she calls the “big aha moment” right in front of her.

The BAM effect is a powerful one. ARAG Australia saw revenue growth in 2023 of over 185% compared to the previous year, and 2024 is tracking well. “[This FY] from a sales perspective, we are 241% ahead of prior year, and we’re 27% ahead of our planned budget – it’s exciting for us. ARAG Australia can see that the broker market is looking for alternatives for their clients, and [both global and local initiatives are] contributing to legal expense insurance becoming a mainstream insurance.” Those brokers behind the curve are sometimes caught out by client awareness and demand for the product. Gale says ARAG has seen cases where a broker initially didn’t want to take on LEI as an offering but was essentially forced to because a client was so convinced of its usefulness. “The client was begging for our product,” she laughs. Gale likens LEI to management liability insurance 20 years ago, or cyber insurance 10 years ago, in terms of where it is on the growth scale, and its potential. “[Those products] had the same slow take-up, and then suddenly it became the ‘new black’, right?” She can see the BAM effect helping the take-up of LEI go exponential in the not-too-distant future. “ARAG’s goal in the next two to three years is to see it very much as a mainstream product offering,” she says. After all, LEI is already mainstream in Europe. In Germany, over 40% of citizens hold legal expense cover as a standalone policy, while in Sweden the level is closer to 90%. ARAG Australia is setting its sights similarly high. Gale says more competitors are coming into the local market as word spreads, and she sees this as evidence of growing demand. “We have aggressive sales goals to hit between now and 2030. I’d like to think that by then, this is an insurance line that the SME business market embraces as a non-negotiable insurance, and individuals through employee benefits via employer benefits programs, and associations have access to it. We’ve got two or three competitors in the market, which highlights the opportunities available around providing all Australians access to the legal environment.”

“But the rest of us in between have to make commercial or financial decisions around whether we pursue our legal right and what it will cost us,” says Gale. The latest Taking the Pulse of the Nation survey, conducted by the Melbourne Institute and Roy Morgan, showed that fewer Australians can save for unforeseen expenses. The survey reported a decline in the ability of respondents to cover a sudden $3,000 expense, with only 35–40% of those experiencing financial challenges able to draw on savings or assets, a drop from previous years – meaning they have no ability to pay for even a relatively simple legal remedy using a lawyer. Gale reckons that 90% of people would answer ‘yes’ to whether they had ever had an employment dispute, a contract dispute with service provider, or some kind of trouble when shopping online – all issues that commonly arise on the ARAGAssist legal helpline. When fairly middle-class people can’t afford to pay for their own legal assistance, there is a huge gap between what Legal Aid provides and the unmet need. The Public Understanding of Law Survey released last year found there were over 12 legal problems per 10 respondents, and more than half of the problems were identified as unmet. It also showed that people generally try to resolve legal problems on their own or with informal help from family and friends, with less than a quarter accessing legal services of any kind.

“We’ve been able to build our product education with resources, stats, figures and information to show our broker partners so that they can feel confident in educating their clients that there doesn’t need to be that gap any more. It’s that middle ground that we’re really reaching out to,” says Gale. ARAG has partnered with a range of associations, employers and unions that have instantly seen and benefited from the value of the LEI offering. “They understand that there is a gap and that is real for their members and their employees, and they see LEI as a way that they can illustrate not only goodwill as an employer or as an association but also that it has true value for [a policyholder] as an individual.”

“Embracing our clients is around how can we not only be a commercial operator but ... then give back through our social or philanthropic piece. One of the initiatives that globally we recently started was our first International ARAG Day. “On September 29, 2023, we offered free legal guidance. We picked a group that we wanted to provide some legal insurance through and … we basically paid for that to happen.

BAM!

A more equitable future for legal access

Published 15 Jul 2024

“You need to think about four costs – legal fees; court costs and fines; lost time and productivity; and the risk of losing the case”

Natasha Gale, ARAG Australia

Agree – able to get all help needed

Disagree – able to get all help needed

Strongly disagree – able to get all help needed

Did nothing

Handled alone/ informal help from family or friends

Got independent non-legal help

Got legal service independent help

2.0%

45.1%

28.7%

24.2%

4.3%

46.3%

27.0%

22.5%

5.5%

45.8%

30.2%

18.6%

4.0%

42.0%

36.3%

17.7%

Source: Victoria Law Foundation’s Public Understanding of Law Survey, 2023

essential growth

ARAG’s five strategic principles

winning spirit

embracing our clients

driving purpose

smart insurer

“By improving access to justice, we strengthen the trust in institutions in our democratic societies.”

Gale has seen the ‘big aha moment’ so many times that she almost needs an acronym – let’s call it BAM for short. She sees it when explaining LEI to broker partners or chatting with friends at dinner parties or cafes – in fact, just about any time she mentions what she does for a living. “The most common reaction from brokers and the broader market is, ‘how have we not known about this product? And how come we’re not embracing this cover?’,” she says.

One of the most effective strategies for ARAG in Australia has been to point out something that is right in front of everyone’s faces: in practical terms, access to legal services is severely constrained by economic factors for most ordinary Australians. While the very wealthy can pay the hefty hourly fees that lawyers command, a National Legal Aid report last year showed that only 8% of Australian households meet the strict income and assets tests for accessing Legal Aid.

Fixing disparity in access to justice

Because the main legal problems that are left to slide are related to employment, health, safety and housing, there is often a knock-on effect where the problem grows and puts pressure on systems such as women’s safety services, child protection, health, disability and policing. Gale cites numerous examples of ARAG being able to help people. Often, customers with a business policy will take advantage of the legal helpline, seeking support on a personal legal issue. “They won’t have cover for a [personal] claim, but what they’ve got access to is our helpline. They can talk to a lawyer for up to 20 minutes; they can speak to a qualified legal representative and get some guidance on where to go,” she says. “We had one insured who called up – her daughter had been involved in a serious car accident and [was] asked to attend a police station. She didn’t know whether she should get representation. Although she had a business policy, what we were able to do was provide her and her daughter 15 minutes with a lawyer, and the lawyer was able to give her some good thoughts around how she might like to proceed. We would hope that having this available support at a vulnerable [time] provides a more positive outcome.” More than once, people who have received help like this with a personal matter end up going to their broker and buying a personal LEI policy. “What we want to be able to provide is that people are being informed about what their legal rights are, and then making decisions after that. Every time we have a claim, we make a difference – we make somebody’s life a little bit better.”

ARAG helping people

ARAG is strongly focused on issues around social justice both as a global organisation and in Australia. Its company-based strategic initiatives are essential growth; winning spirit; embracing clients; driving purpose; and smart insurer, but Gale has a special spot for the middle one.

As momentum towards broader adoption of LEI grows in society, brokers have more of a duty to include it in their portfolio offering. “There’s enough knowledge and information around legal expense insurance in the Australian market now that it should be part of all their clients’ risk discussions,” Gale says. “The brokers that get it and understand it are encouraging the take-up by their clients. “We’ve got pressures from cost of living, and businesses – small businesses particularly – are doing it tough. As brokers have these conversations with their clients, we must be having a smarter conversation about what’s going into their clients’ risk management program. And I think legal expenses is one of the smarter options.” Gale is hoping that Australian businesses and individuals will continue to see the innate appeal of LEI in the years ahead and has plans to encourage many more ‘big aha moments’. “Partnering with insurers or other underwriting agencies is a key initiative for us in 2024 and 2025, as is finding other partners who have a specialised area so that we can partner with them and [provide] support by offering our complementary ‘super’ products with an LEI component,” she says. “It’s all about accessing your legal rights under an environment that is cost-effective, getting the right advice, getting the right counsel and then taking the appropriate action so that you’re not left exposed.”

Improving society by giving back

This was a small contribution but one as a small emerging agency that we are proud of.” This entailed providing legal hours at no cost to an individual. The matter was complicated and required a restraining order to be taken out through the courts. The recipient wouldn’t normally have been able to access or afford senior legal counsel or a barrister. “It needed to go to a magistrate in another jurisdiction where that person would have otherwise not been able to have any kind of access to the legal environment. This person desperately needed that support. We engaged one of our law firms, and they also matched our contribution on a pro bono basis.” Gale plans to partner for International ARAG Day in 2024 with other groups that are like-minded around access to justice. She is currently in conversations with various women’s groups and domestic violence support groups. “[These are people] who don’t have the money, they don’t have access and often don’t have the knowledge of what they are entitled to. Often, they are in environments where various coercive behaviours have been the norm. Financially disadvantaged, with examples ranging from [having] insurances cancelled on them, [no access to bank accounts, often evicted from their own homes and they don’t know what their rights are … there’s this whole area of domestic violence that ARAG Australia is very committed to exploring and trying to find solutions in.”

In the current economy, there is understandably pushback on any new type of insurance, especially among small to medium-sized enterprises. For businesses, the cost of living crisis is pressing hard. Around three in five (61%) of SME leaders surveyed in a recent YouGov study said their business currently holds cash reserves equivalent to less than two months of expenses, versus the ideal of three to six months of operating expenses. At the same time, three in four (77% of) SME owners and decision-makers are looking for new and different strategies to help them cope – with many turning to brokers for advice. It is usually SMEs that can least afford to be sued or to pursue legal action and incur high legal costs. Gale’s plumber is a good example. “He took up a policy – he’s just a small business that has two employees, but I think he’s used the helpline a couple of times and downloaded document templates from our Document Centre a couple of times.” Gale says businesses need to think about the opportunity costs of skimping on LEI. “What would you do if you didn’t have it? Well, you’d be forced to make another commercial decision, which small businesses really don’t have time for, rather than exercising your legal rights and pursuing or defending them, knowing you have an insurance policy that supports you.” When the calculus is laid out, many people on the way to BAM get there quickly. “You need to think about four costs – legal fees; court costs and fines; lost time and productivity; and the risk of losing the case – how that could impact you financially, reputationally and any other adverse consequences that could come from that.” Brokers are generally among those who can see the logic. Gale says a growing number have signed up themselves for LEI. One risk a broker faces by not offering LEI is that if their client finds out LEI is available and would have provided them a solution to a legal issue, they may ask why the broker didn’t offer it to them. “Then that becomes a liability matter for the actual broker,” Gale says.

Opportunity costs and making smart choices

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