Direct Line and Parabis set up ABS to push before-the-event insurance services

Partnership is latest development in insurance sector's move towards collaborative business models

Insurance giant Direct Line Group (DLG) and Parabis Law are setting up a new law firm to be run as an SRA-licensed alternative business structure in a drive to push before-the-event (BTE) insurance products.

DLG Legal Services Limited will offer motor and family protection legal services to both customers who have purchased legal expenses insurance (LEI) from DLG either as part of an add-on to existing policies such as car or home insurance, and to members of the public without a Direct Line policy who choose to instruct the new firm to handle their claims.

"We're trying a new model," said Parabis partner Tim Roberts (pictured). "We will be providing infrastructure and legal services on a secondment basis, working in partnership with DLG. Unlike our Cogent Law division, this is not about 'at fault' insurer or defendant but about servicing customers with legal expenses insurance policies. "

The move is the latest by insurers in search of new business models in response to changes in the personal injury market, including the ban on referral fees. Earlier this year Admiral Group entered into a similar arrangement with Lyons Davidson, launching Admiral Law an ABS on 1 May.

Roberts said the partnership was part of Parabis's long-term policy to develop affinity relationships within the insurance industry and related sectors. Already the group provides white labelling services for Saga, providing legal back-office services behind the over-50s membership organisation's legal expenses insurance product, Legal Essentials, launched in October last year.

"Lord Justice Jackson said BTE insurance was misunderstood and that something was needed to ignite the public," said Roberts.

Parabis's partnerships with Saga and Direct Line were "in many ways very similar", Roberts continued. "It's about outsourcing or co-sourcing the service; you provide the service and staff, not directly to customers but to your client law firm - it delivers both the legal advice and a process to track the progress of the claim."

"We're looking at developing more relationships with insurers on the basis of these sorts of collaborative models," he said. "There will be more of these; collaboration will become a main feature of the sector".

Parabis staff, along with employees of the former RBS insurance company, will be seconded to DLG Legal Services.

The exact terms of the partnership and levels of control have not been disclosed.

Parabis was the first ABS with private equity backing, with Duke Street taking just over 50 per cent in February 2012.

Last year Parabis Law LLP had a turnover of £139m (2012-2013), including non-law activities such as rehabilitation and liability adjusting services.

The law firms on their own - Plexus Law and Cogent Law - accounted for £110.5m.

At the time of the Duke Street deal the group was expected to turn over £160m.

Plexus Law has since acquired defendant insurer firm Greenwoods, whose turnover last financial year was £24m.