Posted 09 August 2016 by Donna Scully
At the annual Doctors Chambers Modern Claims Conference on 15th June, Donna Scully, Partner, Carpenters sat down with the Director of General Insurance Policy at the Association of British Insures (ABI), to ask whether now is the time for true collaboration between insurers and claimant solicitors. Charlotte Parkinson, Modern Claims, reports.
Question, DS: How can the reforms (as proposed by the government in the Autumn Statement), be shaped in terms of how they will work on the ground?
Answer, JD: There will be a consultation at some point in the near future regarding the proposed reforms. In the context of car insurance being compulsory, the government wants to deliver reduced premiums for consumers and insurers have a track record of passing on savings from previous reforms (£1.1 billion passed on to consumers in lower premiums from savings made from the LASPO reforms). A lot of consumers will value those savings more than not being able to make a claim for whiplash. The 60 million motorists will benefit more than the number of people who make whiplash claims (genuine or otherwise). Whether that is right is a political and philosophical discussion that needs to take place in the context of the Government’s forthcoming consultation.
Question, DS: The reality is that we need to focus on the greater good for the customer, but the problem is that we don’t know what the consumer thinks, and are second guessing them.
Answer, JD: And that criticism would be better directed at the government than at me.
Question, DS: I am concerned about Legal Expenses Insurance (LEI). Does the ABI have a sense of how this might look post reform?
Answer, JD: The broader question here is about how much of their damages a claimant will ultimately get, as opposed to paying for the provision of legal services out of their damages. In a changing market, claimant law firms and Claims Management Companies (CMCs) will adapt and innovate, and insurers will need to adapt and innovate with new products as well. Everyone will need to change what they offer customers and the way they do business and legal expenses insurers will be no different to that.
Question, DS: Three years ago, the small claims limit was not increased because the Transport Select Committee (TSC) were concerned about safeguarding genuine claimants. Are there safeguards in place if the increase is made this time, and do insurers have a plan?
Answer, JD: The TSC is a select committee of parliament and are not the ultimate decision makers on whether the Small Claims Track limit should be increased. At the time, the TSC said that increasing the small claims track limit wasn’t the right thing to do, but the government issued its own response to both the TSC report and its own consultation exercise. The Government concluded that increasing the small claims track limit was the right thing to do, but “not at this time”. That wording is extremely important and some people seem to have forgotten it.
Question, DS: But looking back on the report, the reason the government said it wasn’t right to increase the limit at that time was because there were no safeguards in place. Three years later, I still don’t see any safeguards. What is your view on that?
Answer, JD: There is definitely an onus on us as an industry (brokers, insurers, claimant lawyers, legal expenses insurers, etc), to make sure those safeguards are developed so that consumers and accident victims get the compensation they are entitled to in a framework where money from their damages is not siphoned off by CMCs. The onus is on us to sit down, collaborate and stop the fighting. I accept that some people don’t support the reforms, but if the reforms go through we have to do a lot more work very quickly to agree some principles about how the reforms will work in the best interests of customers.
DS: I totally agree with you, at the Modern Claims and Carpenters Roundtable (which took place a week prior to the Modern Claims Conference), the outcome was in favour of cross-industry
collaboration. The one thing that unites the industry is that we don’t want to be feeding CMCs and helping the enablers.
JD: That’s the challenge for the claimant solicitors. The ABI’s position has been public and consistent for the last four years around one of the safeguards we are in support of; a regulated predictable damages framework. We have been down this path before and disputed the types of cases that went into the regulated predictable damages framework. Do you take a very small number of court ordered settlements for whiplash, or do you take the hundreds and thousands of cases that are settled outside the court framework? Claimant lawyers have missed an opportunity to understand how this might work in practice and for us to work together to deliver a system that works for claimants.
Question, DS: I was around when they discussed automated damages and damages based assessment tools, and the divide was around how the levels of damages were set. Do you think there should be a degree of flexibility when assessing damages?
Answer, JD: Yes. Although there may not be agreement on the cases to be included in a predictable damages framework, allowing some flexibility means you are talking about the detail, not the
principle. We should sit down and have a much more intelligent discussion than took place previously, about how we can work together to make the system work. The ABI have done a lot of thinking about this and we will be presenting it to the government as part of our overall submission to the consultation.
Question, DS: You clearly see this tool being used by insurers to deal with clients directly in the new world, is that right?
Answer, JD: Yes. The argument from the claimant sector is that insurers will undersettle claims where there is no legal representation. My argument is that to address that concern we should put in place a framework where there is little flexibility for insurers over the level at which they can settle claims.
Question, DS: Isn’t that going to cost the insurers too much in terms of staff and money, and wouldn’t that defeat the object of any savings on policies for consumers?
Answer, JD: Each insurer knows what money is coming in and what money is going out and exactly how much money is being spent on each head of claim. I have no doubt that insurers will need more staff but the net impact of a predictable damages framework will be substantial savings, that insurers will have to pass on to consumers through lower premiums. Although insurers would control this, they are heavily regulated by the Financial Conduct Authority (FCA). At the moment, the FCA is a very wellresourced and highly staffed regulator that supervises insurers and their interactions with customers. Indeed, one of the fundamental philosophies of the FCA is the need to treat customers fairly. But, if there is a need for more independent regulation, we would be happy to have that conversation.
DS: The rule of natural justice is you shouldn’t be a judge in your own court. What you are suggesting flies in the face of natural justice. The reason insurers feel like they need to control the situation is because of the bad people in the market. The lawyers will be pushed out and some CMCs will be waiting in the wings and will swoop in because the Ministry of Justice (MoJ) haven’t got the resources. The system can be reformed in a reasonable way and in a reasonable time frame to not make that necessary. Starting with the Fraud Taskforce report, there are some very quick, easy wins in there. The SRA should be tougher with lawyers if they are misbehaving and I have heard this is the case. Similarly, if insurers are not acting reasonably, the FCA should come down on them like a ton of bricks. I feel frustrated that we have delivered certain things, but MedCo hasn’t gone how either of us would have liked, but we are doing things to make it better. The Claims Portal is broadly a success and we have made a good start with askCUE PI. There are things we should be looking at, and I would happily disclose the referral source of our claims to insurers – anything that would stop the enablers.
JD: We have done a lot of work together over the last number of years in collaborating to try to improve the system, and the government have supported us in that. The government has also delivered a number of other initiatives to improve the environment for consumers and to take out unnecessary money in the system that is driving up premiums. There is still much more that we could do but I am not totally convinced that the claimant sector wants to deliver the change that is necessary. There is a desire to fight the reforms rather than make them work. We have seen that time and time again and MedCo is a classic example of it. Medical reporting agencies, claimant lawyers and insurers all sitting around the table for months and months on end with the MoJ to deliver a system that would improve the claims environment for everyone, has been fundamentally undermined. That is a bad advertisement for collaboration and it is a bad advertisement for the claims industry with Whitehall. There are people in Whitehall who are sick of trying to get us as an industry to collaborate when they see these sorts of behaviours.
DS: Because MedCo was rushed, there were loopholes and people took advantage of them - it is difficult afterwards to close those loopholes. It has added on more time and people haven’t benefited from it as they should have done because of this.
JD: I agree that MedCo was rushed and the time taken trying to plug the breaches costs time and money. The real prize from MedCo was obtaining much richer data around who is filing which claims at which point. Because MedCo is being undermined by so many disreputable people, the attention of the Board has rightly been focussed on fixing the loopholes, but not focussing on better
analysis of the data is a really unfortunate outcome.
Question, DS: MedCo was also an opportunity missed. Do you think rehabilitation should have been included in it?
Answer, JD: Rehabilitation is an interesting example of the potential for displacement from the Autumn Statement reforms. One of the things we have worked together on is updating the amendment of the Rehabilitation Code. The Association of Personal Injury Lawyers (APIL) and the Motor Accident Solicitors Society (MASS ) have been sitting around the table with insurers and the low value component of the Code was amended to prohibit the referral of a claimant to a rehab provider, by a claimant solicitor who has an interest in that firm. However, the rehabilitation providers started suing, claiming that their business models were being undermined. Actually, a well functioning system is not about people’s business models, it’s about what’s right for the customer. What is right for the customer (motorists) is removing conflicts of interest between those that are producing medical reports or providing rehabilitation and the person acting for the claimant.
DS: I see a massive conflict and a financial interest here. Calibrated damages will not protect that situation. We need checks and balances and to focus on the client. There is a bitterness between both sides, but the sensible people do not want to go down that road; the bitterness must be left at the door.
JD: There are some things that I am never going to agree with you on, and there are some things that you will never agree with me on. There may be press statements back and forth that are
potentially inflammatory and there will always be robust discussion and debate. However, you and I have been mature enough to put all that to one side and focus on the customer, and focus our efforts on areas where there is the potential for agreement, such as askCUE PI and McKenzie Friends. I am very concerned about the potential impact of the reforms on the use of McKenzie Friends in an unregulated environment. Let’s agree to disagree on the areas that we are never going to agree on and focus on the areas where we can work together to make a difference and improve the system in the interests of consumers. Let’s work together to mitigate the displacement risks if the reforms go through, regardless of whether you agree with the reforms or not.
DS: We are completely aligned on that. You have opened the door today and insurers seem more willing to talk and to listen now. Everyone wants a grown up discussion and to forget the arguments that are not relevant to the customer. We agree on a lot – let’s go forward positively and build on this now.