The Legal Solutions Podcast | Episode 1 | What is legal expense insurance and why does it matter?

You are listening to The Legal Solutions Podcast with ARAG, exploring legal expense insurance and protection beyond the policy.

Pete Tessier:

Hey, everyone. Welcome to The Legal Solutions Podcast with ARAG, and we’re exploring legal expense insurance and protection beyond the policy in this dedicated series with ARAG. The first one is going to be with the most important person, the big boss with the hot sauce, Peter Dempster, the CEO. And Peter is an incredibly passionate person about the legal expense option, its societal benefits. And, guess what? He’s a lawyer in training, too. Curt.

Curt Wyatt:

Hey, Pete. No question. There’s something in here for brokers, underwriters, adjusters. Give it a listen and learn a little more about legal expense from Peter, the guy who’s been at it and has a passion for what we’re talking about.

Pete Tessier:

Peter’s going to talk a lot about some of the reasons and the purpose of why ARAG exists and the products it’s bringing into Canada and where the benefits come. And he’s going to talk about the opportunities for growth with this product, and no one likes growth more in a soft market than insurance brokers. So let’s bring Peter in, get into the subject, and hear from the expert himself.

Well, we’ve got Peter Dempster in who is the CEO of ARAG. Peter, the first thing I’m going to say is, did I say ARAG right? Because I’ve been corrected more times than I need to know, and I want it from the big boss with the hot sauce. How is the right way to say the name?

Peter Dempster:

Sure. So not the first time I’ve been asked that, and often one of the first things that people do is they kind of chew on the name and then venture a guess. ARAG. ARAG. There is probably a right way to say it, but you require a knowledge of the German language and [you’re] usually a native speaker to get it quite right. But either way, ARAG, ARAG. Either one is fine.

Pete Tessier:

Fantastic. We always like to get names right. And this is an important one because this is your podcast and we’re talking about legal expense insurance and why does it matter. So let’s ask you, the CEO, what is the why for you in ARAG? Where does this drive come from and your purpose?

Peter Dempster:

Really an interesting question and an important question because, for ARAG, there’s two purposes here. Yes, we’re an insurance company, but the founding purpose of the company 90 years ago was to bring access to justice to all of its customers. So the why for the company is a two-part why. It’s yes, we want to be a great insurer providing great products, but in every country we operate in, there’s a strong focus. And, in fact, I found a principle that’s really to our core about providing access-to-justice solutions in every country that we operate. So the why for ARAG is really moving the needle in terms of access to justice.

Curt Wyatt:

That’s interesting. Peter, it’s Curt here, and, let’s face it, whether it’s brokers or underwriters, people in the industry, we all are familiar with your name and familiar with the idea that legal expense coverage has sort of become a talked-about product when it comes to bolting on to existing commercial policies, sometimes even certain high-end personal alliance policies and what have you. For yourselves at, and I’m going to say ARAG because potato, potato here, Peter, how does legal expense insurance support its end user customers?

Peter Dempster:

Sure. So there’s a couple of things. So the first and foremost thing you’ve got to remember about legal expense insurance in terms of a really robust legal expense insurance product, it’s actually two or three offerings together in one. So the first way to divide that is, yes, we have an insurance solution, but we also have all of our help solutions that surround that, all of our services. So we operate a legal helpline, so our customers can call anytime. They can call two, five, 15 times a year, no big deal. It doesn’t count as a claim, and they can get legal information about anything that they want to talk to somebody about or talk to a lawyer about. They get connected to a lawyer right away. They can chat for as long as they want to get a real good understanding of what their issue is. We get all kinds of calls. We get everything from employment to family to neighbour disputes on that call. So we have that.

And then we also have the insurance solution, which I would consider sort of the Cat for people, the Cat loss for people. This is something that’s happened in their lives that requires the representation by counsel. They’ve been wrongfully terminated. They’ve been sued by their neighbour. If it’s a small business, they’ve been sued by somebody that they’re dealing with from a supplier, for example, and they really need to spend tens of thousands of dollars on a lawyer. Then we have the insurance solution that steps in and pays for those costs and helps them get a lawyer and make sure their rights are asserted.

Pete Tessier:

Peter, I want to ask you a little bit about that first access part that you talked about, the ability for customers to reach out around smaller issues. Let’s put it that way. How much does that provide value and certainty to those customers when they’re thinking of the product? Are you solving a lot of their problems before they escalate into something bigger, and are they seeing that value of just having, essentially, a person to call in their network that’s now for them as opposed to reaching into the ether to find some sort of information around something that could be a very complex legal issue down the road?

Peter Dempster:

For sure. So there’s a really interesting body of work done on what a legal issue is and what it isn’t and whether people identify it. And this is from the Canadian Forum on Civil Justice. They say most people don’t really fully appreciate that they have a problem, that they know that they have a legal problem, and that there’s a legal solution that could help them. And a lot of the calls to the helpline end up giving information that takes care of an issue really quickly so they can have a really good understanding. They can have peace of mind around the actions they’re going to take. So they call in, they get some information, they understand what they should do, what their rights are, and that often resolves an issue. People will call in and say things [like], “I want to do something that’s…I want to do this, this, and this, and that seems like…” And the lawyer goes, “It’s probably a bad idea. Maybe rethink that and do it this way.” And then, as a result, they stay out of hot water; they stay out of a claim situation.

So, definitely, it’s a huge value. It’s a hard one to quantify because the interesting thing I’d say, guys, about our product is although we track our losses in terms of legal fees spent, it’s not really the value. The value is what the customer gets in terms of a resolution. So say we support somebody who’s been terminated and we pay 15 or 20,000 dollars in legal fees for them to deal with their former employer, but they get a 30- or 50,000-dollar settlement. That’s the true value of our product when we think about it, is there’s all those solutions that end up happening that obviously don’t show up in our loss ratio, but they show up in our customers’ lives every day because it’s really their claim. That’s the thing to think about.

This is not a claim that we’ve taken over and the insured forgets about. This is helping the insured in their lives right now with the prosecution or defence of their rights. And I just think it’s an important point to make because the value is not just the legal fees, it’s all the solution that comes with that. Anyway, sorry, Pete, it went on, but I get excited about this point.

Pete Tessier:

You should be excited about it because I think that’s a really compelling story to tell. And stories are the things that people latch on to and say, “Hey, this could be me, too.” There’s an emotional connection to someone’s history and the history of the ARAG clients who have used this experience. So, Peter, let’s talk a little bit more about that then. When you think about the insurance marketplace, what’s driven the need for legal expense insurance then? What are some of the things that said, Hey, we should make this product, we should refine it, we should continue to push it? How has that been driven from its origins in Europe and now into Canada?

Peter Dempster:

So really interesting question. I’m going to answer it in a couple [of] ways. First, what’s driven it on the insurance side is a lot of insurers and brokers looking at ways they can provide a complete offering to a customer. How can they help a customer with its complete risk management? And, right now, if you think about it, we have great coverage for casualty and for property losses, but there’s an exposure that individuals and small businesses have that really, in Canada anyway, was not being addressed, but was being addressed quite thoroughly in Europe. And that’s the legal exposure. If you’re a small business, you don’t have extra cash in your pocket to deal with a contract that’s gone wrong. And you talk about the cost of legal. I mean, it’s basically, you can’t open a file for less than 10 grand when you really have a commercial dispute—never mind actually doing something about it. It’s a solution there that, really in Canada, the insurance community hasn’t solved for. And then there is this, now, solution that we’re responsible for. It’s exciting to solve it that way.

So the second thing that I think is really important about the why in Canada is we’re a country that has a strong legal tradition. We have a really robust economy that has a lot of participation in the middle class and that segment. I would say small businesses, basically low-income to mid-income, have an incredible exposure when it comes to legal costs. We look at this market as something that is a great opportunity in terms of a fit.

But the other thing is, too, we’re seeing a progressive slide in access-to-justice issues in Canada. We have issues with lengthy court delays, we’ve got issues with process, and we have an erosion of the ability of people to actually prosecute and defend their legal rights. So, from our perspective, it’s a great country that is in need for an access-to-justice solution. I think the investment that is being made by law societies, lawyers across the country to try to do something about the access-to-justice issue in Canada is really remarkable, and it matches well with us.

I’ll say one other thing about that, the access-to-justice issue in Canada. Although there’s lots of great efforts happening, a lot of them are off the side of a lawyer’s desk. They’re working in a law firm, but this is their volunteer job. This is everything we do. This is the access-to-justice question. That’s what we do. And so we see this as a great opportunity to move the access-to-justice needle in Canada.

Curt Wyatt:

Peter, that’s really interesting, and you talk about access to justice. Let’s talk about the lawyers. And, how is your relationship with the legal community? How are they responding to this coming into Canada, like Pete mentioned, coming from Europe? How has it been for you, the organization, and your customers?

Peter Dempster:

Yeah, look, we’ve got a really great relationship with the legal community. We just finished, a couple of weeks ago, our Access to Justice Conference. We had great participation from a variety of lawyers who see this issue as incredibly important. I think the legal community, by and large, has embraced this. We’re responsible for paying a lot of legal bills, so I think they like us, but the fact is that we’re taking an issue that’s been important. It’s an important issue for me. I’m a lawyer by training. I’ve thought about access to justice for 20 years, wanting to do something about it. I think, generally, we’ve been quite quickly embraced by the legal community in Canada. Again, this is a product that does something in terms of social change and social improvement for every Canadian, and that’s really, really been well received.

Pete Tessier:

Peter, you’ve just come off of something that you call your Access to Justice Conference. So this is a big event for ARAG. I’d love to hear a little bit more about it, as I was aware of it, but how does that integrate into, and how does ARAG integrate into, the brokerage community and the distribution of the product? That’s sort of where we want to get to is there is now a new product here, and it’s not necessarily new, but a product here that maybe isn’t on every brokerage’s radar. It might be embedded into some of your policies, but you don’t really know that it can be a stand-alone thing that can be sold. How are you integrating with the brokering community and the distribution side of the industry to move this product? And what are some things you’re hearing back from that community to sort of increase your growth opportunities?

Peter Dempster:

Peter, I’m going to answer that in a couple [of] ways. It’s a really, really good question, and I think the first thing that we hear back from the brokerage community is, “Wow, this coverage is really cool. I didn’t even know that it was available. And doesn’t it solve a whole bunch of customers’ issues when it comes to peace of mind?”

And that’s absolutely true. You can take a risk that a small business has or a professional—be it a financial advisor or a dentist—and say, “We’ve got something,” and this is the broker talking to that customer and say, “We’ve got something here that’s going to solve a business and personal need of yours that we haven’t previously been able to solve.” That’s a great message if you’re a broker talking to a customer saying, “I have something new that I can help you with a risk that has not previously been unaddressed by anything.” I think a customer looks at that and goes, “Wow, that’s my insurance broker really looking out for me and coming up with a new solution that’s going to help me with my business. That’s fantastic. That’s great. I’m going to want to stay with that broker and continue to work with that broker in the future.”

And we just finished a study with a company called BEworks—they’re a behavioural economic firm—and they surveyed, I think about 1,400 Canadians—[I] don’t have the exact number—but the answer when it came back, comparing the offering of legal expense insurance to the offering without legal expense insurance, there were individuals, Canadians, valued the insurance package about 12% more, 13% more, which is pretty material they’re saying. We say 10, 12% more value out of this. But almost more importantly, they said there was a 20% increase in the perception of how they felt about their customers and saying that, “If my insurer offers this, they see me as more value and more valuable and more focused on me as a customer.” I think that’s really, really sticky for somebody who’s offering this and decides to offer it relative to a competitor.

One more thing, guys. When I think about the value of this product, we are in a situation where customers are thinking more and more about their general risk management. And from our perspective, having access to a lawyer on demand, having this coverage that can support a small business if it ever faces a significant legal issue, it’s just good risk management if you’re advising a customer as a broker. When you’re thinking about all the things they need to manage their risk, this is a really, really strong addition to an offer.

Canadians, generally speaking, they self-insure their disputes and legal issues. [The] Canadian Forum on Civil Justice said that depending on which survey you look at, somewhere between 40 and 80% of Canadians have had a material legal issue in the last three years. That’s half of Canadians in the last three years have had a legal issue. Many people just don’t recognize it, or they deal with it off the side of their desk. They say, “I’m just going to resolve this,” or “You know what? I’m just going to pay that outstanding bill that I shouldn’t have to. I’m going to let my neighbour do whatever. I guess I got a bad deal in my termination.” And this product allows people to exercise those rights and those circumstances to help them through times when they really, really need it the most.

Pete Tessier:

So, Peter, let’s go back then and have a little bit of that talk of the conference, Access for Justice, because I think that’s a really compelling story that people should know about of what you’re doing in the bigger picture of things. And, to be honest, we go to a lot of conferences. Not every insurance company really puts on their own event that drives awareness to what they do and their value proposition. How are you finding that’s being received? And what’s the bigger picture, and where can it go from here?

Peter Dempster:

So, first thing I’ll say, and I’m going to correct you, this was not a conference about [the] ARAG product. We made this very intentional; this is important. It was not about our product. It was not about what we do. It was what about what’s going on in the access-to-justice community in Canada. And I think that’s an important distinction because, and it goes back to the mission that we’re doing everything we can to promote access to justice in the countries that we work in. So this was very much a community event supported by ARAG. Now, that’s why it was free. That’s why we recorded it and made it available because we’re trying to drive this issue.

I think it’s an incredible part of why I love this business. I think I mentioned before, I’ve been a lawyer for 20 years, at least by training. Never have I had the opportunity to really drive the access-to-justice issue, and it’s always been in the back of my mind as something that I wanted to pursue personally. It gets our team so excited about what they do every day to have a really great mission, a really great opportunity to create change in Canada. So I think that’s where the conference comes from. It comes from an opportunity to drive our mission that we see in all the countries we operate in, and to provide a really great venue for people to exchange ideas and understand what’s happening out there in the world. Yes, it’s sponsored by us, but the only speaking I did was to get up, introduce the first speaker, and sit back down. So that was the focus of the conference.

Curt Wyatt:

Hey, Peter, it was a pleasure to meet [you]. We’re excited to be coming back in a month with additional information on ARAG and what it’s doing in the Canadian market and what the benefits are to the Canadian consumer and to the distribution channel. Peter, it was a pleasure to meet [you].

Peter Dempster:

Yeah, great. Thanks, guys. This was a lot of fun. Thank you.

Curt Wyatt:

Hey, Pete. What a great episode with Peter. Terrific individual as far as he knows this industry. And no question, he’s the President. So it was insightful that these guys have been around for as long as they have. In addition to that, the fact that it’s not just about paying a claim, I was a little shocked.

Pete Tessier:

Yeah, you really see that they’ve taken a holistic approach to this product to say, we know there’s going to be claims, but we also know people are in need of legal protection and legal advice, so we’re going to help on the front end. Now, that may prevent a future claim later, which is a great thing for the company, but it also gives people peace of mind that they’re not left on an island thinking, How do I even choose a lawyer? Where do I find one who might understand my issue? Who’s going to have time for something so small? That’s an amazing value proposition into the insurance community and across the country.

Curt Wyatt:

Pete, as we dive deeper into these episodes, I can see where the listener is going to get a chance to understand more about how these products are used. I didn’t realize for all these years that the coverage was there, not just to pay a claim, but rather protect the consumer on getting the wrong information. And, today, we all dive into AI for this or that chat something. But, let’s face it, grounded AI and grounded data is very valuable because that’s the information that’s correct. And that’s what this organization is delivering; it’s delivering correct information to the consumer.

Pete Tessier:

Yeah, you brought up the AI word. Think of it this way. When you have an ARAG policy, you probably have your access to a legal AI thing that is real life, real expertise, and real experiences. And I think one of the important things that Peter talks about, Curt, is he brought up the unknown issues within the Canadian legal system—delays, processing—all the things no one thinks about. When someone wants access to justice, they want the ability to get an answer. And having an ARAG policy is probably going to help you do that a lot faster, or at least steer you in the right direction. And, Curt, to that point, the question I come back to is, could ARAG’s approach to legal expense insurance sort of be a model for other preventative coverages, where the focus is less on indemnity and more on empowering policyholders? You know what? We’re going to find out more on future episodes of The Legal Solutions Podcast with ARAG here with Canadian Underwriter. So stay tuned.

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