Posted 16 August 2016 by Eve Pybis
Donna Scully - Partner, Carpenters – Chair
Alan Hayes - Legal Director, Carpenters
Susan Brown - Chairman, Motor Accident Solicitors Society (MASS )
Martin Coyne - Managing Director, Ralli Solicitors and Chairman, Access to Justice
Damian Ward - Partner, Keoghs
Brett Dixon - Vice President, APIL
Damien Giggal - Claims Technical Excellence and Development Manager, Ageas
Sarah Hill - Partner, BLM
Steve Jackson - Head of Financial Crime, Covéa
Martin Milliner - Director of Claims, LV=
Andrew Twambley - CEO, InjuryLawyers4U, Spokesman, Access to Justice
Donna Scully: My concern is the customer post-reforms. How do we deal with fraud, and protect the customer at the same time?
Steve Jackson: The key word is collaboration. Once we agree fraud is a problem we can work together to try and solve it. 2014 ABI figures suggested that fraud represented on average 6% of claims spend. This shows that 90-95% of claims are genuine, and our focus has to be on that small percentage where fraud exists.
Andrew Twambley: If the SRA get on board and target fraudulent firms the fraud problem will start to disappear.
Steve Jackson: My problems with the SRA are three-fold: One is a lack of resource to deal with the problem. Two, its lack of sanction when they do find a problem, and three, a lack of collaboration with the rest of the industry.
Martin Milliner: They say they have got adequate resources, and they think they’ve sharpened their teeth. We’ve just got to see whether they actually take the action that they’re promising, which is easier said
Donna Scully: There are bad people out there, and they are the fraudsters, and then there are people who are easily led. They’re not really bad people by nature, but the bad lawyers and the bad CMCs are enabling them. The enablers are such a big problem in this market.
Alan Hayes: There often seem to be no real sanctions. Claimants can make a fraudulent claim, and if it fails, that’s it.
Martin Coyne: Fraud is fraud, and fraud has to be prosecuted by the police.
Donna Scully: The insurance industry set up their own police division, the Insurance Fraud Enforcement Department (IFED), but the problem with IFED is it’s taken up with the big crimes.
Damian Ward: Targeting the fraudster, as in the individual claimant, is one thing. The problem in prosecuting an enabler is that you need the support of the claimant, the individual whose name is being used. Unsurprisingly, claimants who have been abused in this way, innocent members of the public, aren’t willing to take those steps.
Sarah Hill: The SRA does need that one big case to highlight the issue.
Brett Dixon: There are differences of opinion about the percentage of fraud, but there’s no difference of opinion about what should be done about it.
Damian Ward: Fraudulent firms have built themselves around being SRA proof; there appears to be clear blue water between themselves, their clients, and the medical agencies. There are some invisible links that the SRA will struggle to get to grips with.
Martin Coyne: In the Insurance Fraud Taskforce (IFT) report, there is a recommendation that the burden of proof in Fraud SDT cases should change from Criminal to Civil burden. The Criminal Courts should be dealing with that.
Martin Milliner: It would enable the SRA to act more forcefully across a larger number of firms.
Damian Ward: We have to have some faith that the systems we have now are still capable of establishing the truth in certain cases.
Damien Giggal: It’s important we strike the balance between access to justice and focusing on the claims that need defeating. With the potential fallout from Brexit there might be different people with a different parliamentary timetable, and removing the right to claims for damages might be delayed or lost in changed priorities.
Sarah Hill: The fraudsters will manipulate their model to deal with the regulations and the changes that are before them. The challenge will be tracking these changes and then identifying those behaviours.
Brett Dixon: I can’t see the point of the Autumn Statement if it is a fraud measure. If you remove legal representation by raising the small claims limit, and you replace it with CMCs, removing solicitors and the SRA from the process, isn’t the government going to create the Wild West?
Martin Milliner: The Autumn Statement isn’t about combating fraud, it’s about lowering household bills. So a bi-product may be a lot of fraud will be squeezed out of the system. But you can’t leave legal representation and regulators to one side and hope for the best.
Donna Scully: At the APIL Conference, Lord Faulks said it’s not just about fraudulent claims; it’s unnecessary claims that are raising the small claims limit. I don’t think the impact assessment is going to look properly and I don’t think the consultation is.
Donna Scully: Are we satisfied that what’s going to happen is good for our industry, good for us, and good for the people we represent?
Alan Hayes: As an example, if one of our customers is subject to an allegation of fraud by a third party insurer, we take a very firm line with that customer. The CMCs aren’t going to give them that advice; they’ve always got a vested interest in the outcome of that claim.
Damian Ward: And the claim might not go away; you might not have it anymore but that Claim Notification Form (CNF) will reappear somewhere else.
Donna Scully: That’s why askCUE PI is so helpful as it can help us to detect if a client is lying to us. If that client reappears with another CNF and an askCUE PI search is done, it alerts the insurer.
Susan Brown: The profession has done a lot of collaborative work over the past few years; it’s led to Claims Portal, it’s led to askCUE PI, it’s led to MedCo, all of which are positive ways for us to get together, work out what the problem is and how to address it.
Martin Milliner: Despite all of that, nothing has changed. Things have not improved at all with MedCo. In fact you could actually say they’ve deteriorated.
Susan Brown: MedCo has not yet been given the chance to work.
Martin Milliner: The Claims Portal is extremely frustrating. Why can’t we get simple things like naming the source of your instructions, which CMCs work from? In the future, CMCs will have to be authorised by the Financial Conduct Authority (FCA), so we’d be able to track them and obtain the intelligence, we’d soon be able to put a case together.
Donna Scully: If something is helpful to the insurer, then we might have to live with it, because there has to be a compromise.
Damian Ward: More transparency at an earlier stage can create a faster claims process for those claims that insurers are happy with, and that’s a different consequence of collaboration that we haven’t talked about.
Brett Dixon: There is a certain nervousness amongst lawyers about sharing information with insurers when you have pre-med offer practices contacting your clients directly.
Donna Scully: The frustration I have with pre-meds is when we say to clients they have to get a medical report and provide information, and the client asks why, because last time the insurer gave them £1,00 for nothing. It makes it too easy to claim, and makes the system worse, because you need checks and balances.
Steve Jackson: If you’re talking about opportunistic fraud, which I believe the proposed changes will reduce, as opposed to organised fraud, what is it that encourages people to make a frivolous claim? Premed offers may be one of those things. I’ve done a lot of work with insurers around Europe over the past few years and it’s interesting to see how different we are when it comes to assessing low value claims compared to other countries.
Brett Dixon: One difference is that there are no CMCs.
Donna Scully: If the reforms come in, the CMCs will have a field day.
Martin Milliner: The FCA will deal with that issue.
Alan Hayes: That’s assuming the CMC decides to go down the route of seeking authorisation.
Martin Coyne: The skill sets are with the staff at the Claims Management Regulation Unit (CMRU) and with a number of people at the Ministry of Justice (MoJ). How do you transfer that experience to
the FCA in one go?
Donna Scully: You’re probably talking two to three years, and that’s too long.
Martin Coyne: In that time the CMC’s will move on, and they will metamorphose into another legal entity.
Susan Brown: The more difficult you make it to be a regulated operation, the more there will be an unregulated sector that is harder to control.
Steve Jackson: Two thirds of the ABI fraud figures were classed as organised crime, and that money goes in to all kind of sinister pots.
Martin Milliner: We wouldn’t want to see an underground CMC existence. We don’t want to see claimants not being represented. It’s a basic human right that people deserve representation, and it’s incumbent on the SRA, wider regulators and individual law firms to get the rotten apples out of their own barrels.
Donna Scully: In terms of the OFT and the Competition Commission, was anybody disappointed that the reviews took so long, cost millions of pounds, and changed nothing?
Martin Milliner: The CMA enquiry couldn’t solve the problem because insurers didn’t collaborate well enough to come up with one appropriate view to protect the consumer’s interest. The government may come in and decide our fate, which is not necessarily a good thing.
Donna Scully: That’s what these reforms are. Raising the small claims limit is a last resort because it’s going to take away access to justice for genuine people, and there’s no protection in place for them. We need to make sure that the MoJ impact assessment is genuine, in a way that protects innocent people, and in a way that suits the industry.
Donna Scully: What do the government need to look at in the impact assessment?
Andrew Twambley: InjuryLawyers4U carried out a survey asking the public what they would do if the government proposals go through, and a significant portion said they wouldn’t bring a claim to court, because they can’t face going against an insurance company without support.
Sarah Hill: The fraudsters will look at other types of injuries that can be claimed for and whiplash claims will morph to something else.
Martin Coyne: In the USA, claims for bulging disks have grown in the states where they have banned whiplash claims.
Damian Ward: There will be a prognosis creep by certain organisations just to get over the £5,000 hurdle, and there will be injuries that will morph. The end of the market that is hell-bent on continuing to make money from these claims will adapt their model accordingly.
Susan Brown: Squeeze the balloon and something will pop up somewhere else.
Donna Scully: In 2011 at MASS , we had 30,000 letters from clients that we took to Downing Street saying they didn’t want to represent themselves, and it was influential in 2011 when the small claims limit was being discussed.
Martin Milliner: When the Woolf Reforms were implemented and the original small claims limit was introduced at £1,000, 48% of whiplash claims or soft tissue injury claims were below that threshold and people still found access to justice, so why wouldn’t they in the future?
Donna Scully: There isn’t a safeguard in place now, and there needs to be one.
Susan Brown: It will have to be a formula to enable solicitors to work profitably, and that’s a conundrum that’s very difficult to find a solution for. We at Claims Portal already have law firms phoning our IT helpline for legal advice, so if you have 700,000 litigants in person or on the phone looking for advice on how to value their claim, where are they going to go for that?
Martin Milliner: Insurers will play a part; they are working collaboratively with some genuinely good credit hire organisations, and have come up with ways of working that take the friction out of it - the same could apply to the legal market.
Donna Scully: How could you pay out legal costs for all the people claiming? Would the insurers have to cost a safeguard?
Alan Hayes: It will be interesting if the consultation is going to say Before the Event (BTE) will be more expensive post-reform. Would the saving on motor policies be balanced by increasing BTE?
Martin Milliner: I’m not sure it’s the answer, but it’s an option.
Donna Scully: Can you see the good people being able to cope with these cases on their own?
Alan Hayes: If we got to the stage where the Portal was a publically accessed, easily understood document then claimants could do it themselves. With the prognosis creep we will be at £5,000 for most claims fairly quickly. It doesn’t solve anything; it increases damages, it doesn’t improve access to justice, it doesn’t solve the industry’s problems or the government’s objective of lowering premiums.
Donna Scully: People have to pay compulsory motor insurance, so when they have an accident and they can’t be represented, they won’t feel like that’s access to justice. Fraudulent whiplash is connected to the
enablers, who tell the clients what to say to the medical expert, putting words in their mouths and making good people do bad things.
Martin Coyne: The IFT Report mentioned a 6 month CNF cut off, and we at A2J certainly advocate a 12 month notification period. The doctors say that any minor soft tissue injury that they are asked to comment upon for the first time, and which is more than 12 months old is objectively very difficult to verify. If you permit no costs for late CNF lodgement after twelve months, or you diminish the amount of quantum a client can get for old injuries, that may prove to be a disincentive for the enablers. It would lessen the potential for exaggerated injuries and reduce the money available to the enablers. Nuisance calls would also diminish.
Andrew Twambley: If you do limit it to 12 months, then a lot of fraud will disappear, because a lot of the claims between 12 months and three years are data-mined, so that will stop.
Donna Scully : If we introduce the limitation, and we do other things the government suggests, then we’re helping to fight CMCs. Everyone around this table says the CMCs and the enablers are a huge problem.
Susan Brown: The government thinks everybody wants to get to that pot of money: the costs and the damages. They think taking that out will solve the problem. But we should be taking out the people who are creating the problem.
Sarah Hill: It’s the cost of tracking them in the future; they’re evolving and you’ve got to evolve too, and that costs money.
Brett Dixon: And the government won’t spend any money.
Donna Scully: Access to Justice is so down the pecking order on the government’s agenda, especially for the people we deal with. But they are on our agenda, and I’m going to fight as much as I can to ensure the voice of the customer is heard, to see how they are going to be protected in the new world, and to not let CMCs take over this market and make it worse than they already have. Don’t be quiet, let’s all be involved. The government doesn’t understand this market. This is our market, these are our customers, let’s make sure we put in the consultation and protect Access to Justice now and in the future.