How the economic situation is driving increased demand for commercial legal protection


Authored by ARAG Head of Sales and Marketing Andy Talbot

In turbulent economic times like these, it’s often hard to predict which way demand in different markets will turn. Families and businesses have clearly been feeling the squeeze for some time now, under heavy financial pressure from soaring energy prices, fuel costs and wider inflation.

That certainly looks like it will get worse before it gets any better and, while rising interest rates are always a double-edged sword, they will add to the burden for many.

Early in the pandemic, we expected commercial legal expenses insurance (LEI) sales would drop slightly, not least because many businesses were having to stop trading. In fact, ARAG has seen significant growth in our commercial book over the past two years.

The number of companies that ARAG insures against legal risks increased by about 20 per cent in 2021 alone, helping to push the company to an excellent overall financial result for the year, despite the continuing pandemic.

This seems to correlate with the results of the independent research that we published earlier this year. Brokers reported that demand for commercial LEI is increasing rapidly. It looks less surprising, when we think about the succession of global events that has transformed the UK business environment in recent few years.

From Brexit to the #metoo movement, Covid-19 to Russia’s invasion of Ukraine, the challenges for businesses have not stopped. Longer-term structural and societal changes have been compounded by global events that have left the global economy reeling.

Tough economic times tend to heighten awareness of potential legal problems, as the risk of disputes with suppliers, customers and employees increases. The need to recover commercial debts is also mounting and businesses are aware that HMRC is looking to recover some of its enormous expenditure during the pandemic.

Many of the commercial brokers surveyed for our research had seen demand for legal expenses insurance growing already. Most anticipated that demand will continue to grow through this year, at least.

The research revealed an even stronger trend in the Employment Practices Liability (EPL) market. 70% of brokers said that they’d seen demand for EPL increase over the previous 12 months, with nearly three quarters (72%) saying they expected it to grow further, over the year to come.

Often considered commercial LEI‘s big brother, EPL is better suited to larger businesses that probably have an in-house HR function. It can offer the same breadth of cover as standard legal protection, against the legal costs of contract disputes, tax investigations and more, but provides much deeper cover for employment risks.

Sadly, that risk of employment and other problems looks set to grow, as the recession looming towards us starts to bite. A very different commercial landscape has emerged since the pandemic. Fortunately, the insurance industry has tools to help businesses to navigate it.

Commercial legal protection and, for bigger organisations, employment practices liability policies provide a seatbelt for companies in volatile economic times.

We help to keep businesses of all sizes on track and focused on the commercial challenges they are facing, while protecting them from the buffeting effects of a turbulent economy. It is little wonder that the popularity of these products continues to grow.


About ARAG

ARAG UK is a specialist legal insurance provider and is part of the internationally recognised ARAG Group which serves 14 countries worldwide.

Providing several emergency assistance insurance products and an innovative range of Before-the-Event and After-the-Event legal insurance products and services, ARAG UK prides itself on its client-focused approach. This has been recognised by the industry following the results of the Insurance 360 Legal Expenses Insurers Study in which ARAG UK was voted 'best legal insurance provider'. youTalk-insurance sharing ARAG UK insurance news. 

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