and stable mechanisms which have been in
operation for decades. In other words, it will
not attempt to fix what is not broken. The
new Directive maintains and renews the
effect of some provisions contained in the
1987 Directive. Such provisions are those
related to legal expenses insurance.
The Directive provides that under-
takings may offer to policy holders legal
expenses insurance covering certain
categories of claims. The legal expenses
insurance must be included in a separate
contractual document or a separate section
within the policyholder's contract. The
policyholder's freedom to select the lawyer
who is going to represent him/her in
negotiations or in court is almost absolute
and may only be limited by the undertaking
itself, provided that certain safeguards
are in place to ensure the absence of any
conflict of interest between the undertaking
and the lawyer selected. Those safeguards
have been designed to prevent the under-
taking from reaching a settlement or
handling a legal action in a way which is
against the interests or is unfair given the
circumstances of the insured.
relation to the legal expenses insurance has
a number of additional benefits, including
the following:
does not have to pay a lawyer to file a
claim, defend a lawsuit or negotiate
a settlement. Therefore, irrespective
of the insured's income, the cost of
litigation does not limit access to the
justice system.
member states, fraudulent claims have
exceeded 10 percent of the total claims
made against insurance companies.
Provided that certain conditions are
met, undertakings may appoint a lawyer
of their selection, thus preventing the
potential fraudster from setting up a
fictitious claim with the assistance of a
legal practitioner of his\her choosing.
undertaking, he/she may rest assured
experienced and battle-hardened
practitioner, as it is often the case with
insurance litigators. The policyholder
will receive legal services of excellent
quality, thus minimizing the risk of
losing in a legal action or reaching
an unfair settlement after receiving
advice by a firm selected by him/her.
At the same time, undertakings bear an
ongoing responsibility to cooperate with
highly qualified legal practitioners in
order to offer the best services available
to their clients.
as of the time of writing, it is certain that
the changes brought by Solvency II will
prove to be beneficial not only for the
shareholders and investors of insurance
undertakings, but for the policyholders
as well. The first prudential reporting by
insurance and reinsurance undertakings
under Solvency II with reference to the first
day of application (for undertakings with
financial year ending on December 31) is
expected sometime during April 2016.