ARAG is the leading insurance company in the field of legal protection. Around this concept of legal defense, this insurer has expanded its range of insurance products, including travel assistance and rental protection policies. New insurance that meets new needs of society. Juan Carlos Muñoz, commercial director, explains the evolution of the company and the characteristics of its main lines of business.
ARAG has traditionally been considered a company specializing in legal protection insurance. Is this definition still valid today given the push for new product lines such as rental protection insurance or travel insurance?
Our raison d'être is Legal Defense. This, obviously, does not mean that in some countries like Spain we also promote other lines of business. In the case of rental protection insurance, the most outstanding part related to the service is also the legal defense. On the other hand, in Travel Assistance it is very different. It is a very different branch, but it is true that our values as an independent and specialist company also fit very well.
How do you distribute your products?
Mediation constitutes ARAG's main distribution channel. The degree of specialization and training in this channel is essential in the sale of Legal Defense insurance, where the insured must have all the information and advice possible to assess, in due measure, the advantages of having an independent legal defense.
Let's talk about travel insurance Has the pandemic changed citizens' perception of risk when traveling?
Of course. We have all been much more aware of what can happen if we go on a trip and an accident occurs or we have an illness. Or even if we can't travel, we have to cancel a trip and we don't get our money back. The client is now much more aware and, in addition, has much more knowledge about the guarantees that he wants and needs.
Before the pandemic, it was estimated that the percentage of trips that were insured was approximately 25%. After it, this percentage has been established above 60%. This level of awareness on the part of the traveler, as well as the greater offer of insurance by the organizers of the trips, is something that has been internalized.
What does this type of insurance offer? What is the secret of your success?
The insurance offers everything from healthcare abroad, repatriation in case of illness or death, trip cancellation expenses, civil liability, early return in case of hospitalization of a family member... Its success is precisely how complete it is. In addition, it is constantly evolving: during the pandemic we added coverage for covid-19 and, recently, we have added coverage for pets.
Is this insurance still mandatory to enter some countries?
Yes, just like before the pandemic. There are countries that require a series of coverage to process the visa, such as medical assistance or repatriation. It is best to consult it on the website of the Ministry of Foreign Affairs or at the country's embassy.
What are the most common incidents covered by this insurance?
The most common claims are those related to medical assistance, transfer and repatriation, as well as expenses for canceling the trip. But a good travel insurance usually has more than 30 coverages and they all have an accident rate and are very important and necessary. The probability that something covered by travel insurance will happen to us is much higher than most people think.
Does it make sense to contract this type of insurance for trips in the national territory?
Yes, perhaps not so much for the medical assistance part, but for the rest of the coverage such as repatriation, civil liability or even trip cancellation expenses.
What prospects do you have for this summer's campaign?
The tourism market is being somewhat volatile. The year started very well and now it has slowed down a bit due to uncertainty, inflation, geopolitical instability, the high cost of travel, especially flights, etc. This causes the reserves to change, depending on the evolution of all these aspects. Reservations are now made less in advance, destinations are changing, as well as the duration of the trips.
Our perception is that, in any case, the summer campaign will be very positive and the volume of travel insurance sales will grow compared to last year, which was already the best year so far.
What market share does your company have in this insurance product?
Last year we closed the year with more than 40 million euros, which is a fairly large share, taking into account that we mainly target the tourism market of travel agencies and individual sales through mediators.
Is there still room for growth?
Yes of course. Although the level of penetration of travel insurance has grown a lot after the pandemic, we are still far from other countries.
What penetration does this insurance have in other countries?
Our reference should be the countries around us, at a European level, and here we are still behind in many cases.
Another product line that is experiencing strong growth is rental default insurance. What is the evolution of this product in your company and what prospects do you have for this year?
I think it is more accurate to call it rental insurance since everyone thinks about non-payment of rents, but the guarantee of legal defense is very important, as much or more than the non-payment itself. Its evolution has been very positive in recent years, with sustained growth. It is true that in recent months we have been noticing a drop in the supply of rental housing that has slowed down insurance production, but it is also true that the portfolio behaves better due to the greater uncertainty that exists.
What impact does the existence of this insurance have on the rental market?
The fear of possible defaults or damage to the home has become a real headache for many owners who have rental homes. A fear that has been increasing since the text of the Housing Law that came into force on May 26 was known. Given this situation, the interest of owners in rental insurance has skyrocketed.
This product offers landlords guarantees to cover the rent of up to 18 monthly payments. The necessary legal procedures are also carried out to start the eviction procedure. In addition, the lawyer, the solicitor and all the expenses that are derived from this procedure are included.
Does it logically benefit the policyholder who is the owner, but does it have any positive effect for the tenant?
The owner will always need security when renting his home. That makes the offer increase and the prices for the tenant do not rise so much. Also, if he does not have insurance, he will most likely ask for more months of deposit or the tenant will pay a few months' rent in advance. That makes the financial burden higher for the tenant. With the ARAG Rental insurance, the owner has full assurance that if something goes wrong he will have a specialist company to protect him and the tenant will not have to pay more amounts.
What main advantage does contracting this insurance offer the owner compared to other measures such as requesting a deposit of several months?
With a bond, the landlord still has to take responsibility for finding a lawyer and paying all the costs. With the insurance this is covered, in addition to an advance payment in case of non-payment that will begin to be collected at the time the claim is filed.
Does this insurance act in case of occupation of the house?
We have a specific insurance for the illegal occupation of the houses that can be added as a complement to the rental insurance. In this way, if the house is left empty (due to tenant vacations, between rental contracts...), the owner will also be covered if there is an occupation.
How do you assess, as specialists, the new Housing Law?
The (real) effects it will have are still unknown. The two most outstanding measures of this Law -and without a doubt the most controversial- are on the one hand the limitation that will be applied in the areas that are declared to be stressed in rental prices and the other is the limitation of the annual increase in rents that until now was linked in most contracts to the CPI. Now, on the other hand, it will have a ceiling of 3%, in general, but before that, the collaboration of the autonomous communities and the town halls will be needed for its implementation, since these administrations must establish their 'stressed zones', those areas in which the revaluation of the rent will be limited.
Could there be a 'shocked' among the owners to see their profitability expectations hit? It is possible, but a property already amortized does not produce anything if it remains empty, let alone if it is still mortgaged. On the other hand, this measure is accompanied by a penalty of up to 150% in the Property Tax (IBI) for empty homes, which should discourage exit from the rental market and encourage the entry of new units. Whatever the result, there is no single lessor profile, so the decision to exit or abandon the activity is not as predictable as it seems.
Regarding rental prices, the current inflationary cycle of the economy has pushed them even higher in general terms, while demand continued to rise, so limiting the revaluation of contracts does not reduce the current percentage of income that tenants allocate to rent, it only slows down its growth.
What insurance should tenants purchase to protect themselves from potential landlord defaults or abuse?
We have recently created insurance, ARAG Tenant, which covers any problem that the tenant may have with their rented home. From being able to claim an abusive clause to the advance of the deposit when leaving the house.
Going back to ARAG's original activity, legal defense, what changes have the products in this field undergone in recent years?
Although the essence of the product has not changed, it is true that it has had to adapt to changing times. Concepts such as online shopping, car sharing or tourist rentals have become protagonists in our policies.
Is a product more suitable for companies or professionals than for families?
No, precisely our will is that there is a product for each profile. Of course, we have specialized products for companies and professionals, but we do not forget about individuals. The mediator will be the one who guides the final client so that he can choose the insurance that best suits his needs.
What does the insured contract when signing an ARAG legal defense policy?
Above all, peace of mind. And the guarantee of having our lawyers to defend your rights against any problem of daily life.
How has the use of this type of product evolved in recent years? Do you deal with problems such as bullying at school or at work?
As I mentioned before, our policies have adapted to changing times and claims evolve in the same way. Now talking about bullying or cyberbullying is something we are used to. At this point I think it is important to highlight the ARAG program 'Facts and Rights'. These are talks that our lawyers give in schools to prevent this type of situation.
Does ARAG have a real 'army' of lawyers? How do policyholders use your legal defense services?
ARAG makes the Telephone Legal Assistance service available to its policyholders to solve their legal doubts. The channel allows the company's clients to consult with specialized lawyers about the problems they face, being the first line of defense for their rights. This service is directly aligned with the insurer's founding principle, which is to provide legal access to all citizens.
What are the main inquiries you receive?
The owners of Catalonia, Madrid and the Valencian Community are the ones that have the most legal conflicts with the tenants with 31.7%, 23.3% and 10.5%. These are data from an analysis that ARAG has carried out with the almost 50,000 legal consultations received by the insurer throughout the year 2022. The most common doubts are related to non-payment of rent by tenants, the possibility of raising the rental price, the duration of the contract, questions about who is responsible for carrying out a certain repair or how to act with the deposit in case of damage.
Housing-related issues accounted for 25.3% of all inquiries received by ARAG last year. In fact, this is the main concern in all the Autonomous Communities except Andalusia, where what is most interesting is the labor aspect with 17.9%.
Legal consultations from citizens within the workplace account for 13.1% of the total and mostly refer to issues related to labor procedures (30.7%), Social Security (26.3%) or new hires (22.1%).
On the other hand, the problems with the community of neighbors represent 10.3% of all the doubts of the citizens. The procedure for claiming fees from delinquent owners leads the list within said category (24.1%), followed by the rights and obligations of community co-owners (18%).
The volume of inquiries remains regular throughout the year, although they drop slightly during the months of August and December. The first days of the week are those that bring together the largest number of calls.
Do you use AI when answering some questions from policyholders? Do you think that this technology has a long way to go in the legal advice that you offer as specialists or is it a new competitor?
AI can help us automate processes to make us more agile and competitive, but legal advice must be personal. It is precisely the strength of having specialized lawyers who handle the case, from a simple consultation to a case. The humanization of this care is essential.
What is true in the irony of the phrase: "have lawsuits and win them"?
It refers to the large losses that a lawsuit can entail whether it is won or not. No matter how much one wins a lawsuit, the simple fact of going through it is punishment enough. In fact, there is also the saying: “a bad agreement is better than a good trial”. These sayings reflect the negative vision that people have of Justice and we cannot forget that, more and more, citizens seek to resolve their differences by resorting to alternative dispute resolution methods to ordinary justice.
Do we resort to justice very frequently or, on the contrary, do we sin by not claiming our rights?
Sometimes the problem is that we do not claim because we do not know what we can do. We resign ourselves to accepting situations that we could fight if we had more information or more knowledge about our rights. That is why all our policies have access to our Telephone Legal Advice service, because the first step to defend our rights is to know them.
Does having legal protection insurance empower us as citizens?
Undoubtedly, as I said, it is aligned with the founding principle of our company, which is to give access to justice to all citizens and to be able to defend their rights, without involving a significant financial outlay. Having a legal defense policy makes us stronger to be able to sue with other actors, without having to think about the economic outlay that it entails.
