Confidence on wheels

Fully insured? An accident can also wreck your finances, writes Edmund Tirbutt

In the absence of blissful ignorance, peace of mind is invariably worth paying for. However, many insurance policies that purport to provide blanket cover still leave much to be desired. This is particularly true of motor insurance.

Two-thirds of UK private motorists have "comprehensive" cover, but claimants can lose part of their no-claims discount and may have to pay a policy excess. The cost of each claim can easily exceed pounds 100. Furthermore, a standard comprehensive motor policy does not cater for the fact that claimants may have to hire another car whilst their own is being repaired. Nor does it cover legal costs when claiming against third parties, and few people qualify for legal aid.

Legal aid is not available in small court cases. For larger civil cases to qualify for it in full, the claimant's capital must not exceed pounds 3,000, and disposable income pounds 2,425. Even to receive some help, capital must not exceed pounds 6,750 (pounds 8,560 for personal injury) and disposable income pounds 7,187 (pounds 7,920 for personal injury).

Claims often cost tens of thousands of pounds to resolve. Even innocent parties involved in the most mundane of accidents may still face a total bill of pounds 1,000 or more. There is therefore a strong case for taking out "Uninsured Loss Recovery" (ULR) - a claims-handling service backed up by legal expenses insurance that helps recover these potential losses for non-fault accidents. The better policies cover drivers and passengers throughout Europe for at least pounds 50,000 per claim in respect of legal expenses. They also provide access to a 24-hour legal advice and assistance helpline.

ULR has been available in the UK since the mid-Seventies, and normally costs pounds 8 to pounds 12 a year - not much, compared with pounds 300 to pounds 400 for the average motor policy. It is normally sold as an add-on to a motor policy via an insurance company, broker or other intermediary. It may even be provided free by car manufacturers, motor clubs and even direct insurers.

"Care should be taken to understand what cover you've got, and to avoid any duplication," warns Martin Haley, spokesman for CareAssist. "These things do get put in motor insurance packages, and can be available through different guises."

An even greater potential stumbling-block concerns the possibility of being insured with an unsuitable provider. The collapse of Comprehensive Recoveries, in November 1995, a London-based ULR company operating without insurance backing, illustrated exactly what can happen. Hundreds of cases have been left outstanding.

Those who already have ULR cover should check that they are with a suitable provider. Policyholders of the five major players - DAS, Legal Protection Group, Hambro Legal Protection, CareAssist (Royal) and Lawclub Legal Protection (Cornhill) - should have little to worry about.

Those insured with other providers should enquire whether they are members of MULRA (Motoring Uninsured Loss Recoveries Association). This was formed in March 1994 with the aim of encouraging greater awareness of the pitfalls of dealing with ULR providers that do not meet recognised market standards.

Not all non-MULRA members are necessarily cowboy outfits (Hambro Legal Protection and CareAssist have chosen not to join, and some smaller non- members have insurance backing). Nevertheless, MULRA represents the only available yardstick of credibility, while all its members are insured with an authorised insurer.

Legal changes resulting from Lord Woolf's review of the civil justice system will further increase the importance of being with a suitable provider. Since January 1996, the limitthe small claims court is raised to pounds 3,000 for all claims except those for personal injury.

Many smaller ULR providers do not deal with claims in-house, but farm them out to solicitors. Much of this work is done on a conditional fees basis (solicitors do not have to be paid a fee unless they win the case).

"A lot of arrangements ULR providers have with solicitors will have to be changed," warns Dave Crapnell, director of the ULR division at Legal Protection Group. "The providers will either have to renegotiate a new and less attractive deal with solicitors, or start to do their own claims- handling in-house.

"Either way costs and prices will have to go up. The message is, make sure you are with a ULR provider that handles claims in-house"n