Posted 06 January 2017 by Donna Scully
Q What do you feel was the cause for the postponement in the Osborne reforms?
We’ll probably never find out why the reforms have been so delayed, but it is likely that there were several reasons. I know for certain that the MoJ was finding it tough going back to the spring to get hold of reliable and meaningful data for the impact assessment that must accompany any consultation paper. That data-gathering exercise then got caught up in the pre-EU referendum purdah period and general stagnation that was felt across government. As to why the consultation paper didn’t appear in October, I’m with Lord (Charlie) Falconer on this and his observations at the ABI motor conference a few weeks ago – with the 23 June vote in favour of Brexit, government has much bigger priorities and issues to contend with. The resulting change of government and an entirely new MoJ ministerial team must have contributed as well. Given the scale of the reforms and the sheer volume of the 186 pages that make up the consultation paper and impact assessment, it’s pretty clear that it was being prepared for quite some time.
Q What are the main problems with the proposed reforms, and which, if any, of them could be beneficial to the claims sector?
Unfortunately, the MoJ have yet to be convinced to change from the potentially disastrous course the Government is embarking on, littered with dangers and potential pitfalls. We have consistently pointed out the ‘unintended consequences’ since the reforms were announced in 2015. They will do very little to reduce the number of claims, prevent fraud or address the bad behaviour of CMCs. Instead they will drive bad behaviour at the expense of the customer. The proposed reforms are short-sighted, unfair and may have the opposite effect. Previous reforms such as LASPO, have demonstrated that ill-considered and predominantly one-sided agendas do not achieve their objectives. This spurious questioning of the legitimacy to pursue justice and compensation for one injury only is deeply troubling. It condemns legitimate and reasonable claims challenges, one of the basic foundations of our centuries-old legal system and of our system of restorative insurance cover. Although we’re not representative of the whole sector, nearly 30% of Carpenters’ clients do not pursue injury claims, but have sustained financial loss. The reforms would leave these customers without assistance and bearing the loss themselves, which shows the absurdity of the proposals. On the positive side, if you exclude the recommendations around whiplash, the Insurance Fraud Taskforce came up with many sensible suggestions. Also, the ban on pre-medical offers is a positive step to defer fraudsters, but in isolation it will simply encourage CMCs to arrange a medical report and rehab through a ‘friendly’ agency – with all that entails in terms of the value of the claim and the need for and cost of treatment.
Q What should be the focus of claimant lawyers in the wake of the reforms?
Claimant lawyers must continue to fight these ugly and unfair proposals. Every lawyer I know entered personal injury to seek justice for innocent accident victims. These reforms threaten this basic principle and we must fight them with all our strength. Three of the four main proposals require primary legislation so there will likely be a Bill in the next parliamentary session. I hope that the proposals come under intense scrutiny in Parliament and that the worst elements are addressed. But the legal sector must also do more than protest and shout from the side-lines. Most lawyers and legal firms are honest, but there are clearly some who are prepared to take on claims with few checks about their honesty and validity.
We will all potentially suffer because of a few rotten apples. I know that the Solicitors Regulation Authority has said it will improve, but its past record in identifying and pursuing the miscreants has been woeful, and so it must improve. There should be a zero tolerance to bad behaviour from any part of our industry.
Q What effect would the reforms have on fraud?
I really wish that we were facing a reform package that would combat fraud in a thoughtful and practical way. Fraud should be the focus of the reforms, but they’ve moved away from that to tackling supposedly excessive costs in the system. The announced reforms will do little, and may even increase fraudulent behaviour, encouraging a rebound in the growth of the CMC sector and moving towards a more US-style system.
Everyone familiar with the problem knows that combating fraud is complex. It must be approached simultaneously from multiple angles. Action always leads to a reaction. Unless you are very careful, taking time to consider the unintended consequences, some of which can be predicted, you can close one potential loophole and another appears. This so-called displacement will lead to an increase in a rise of other types of claim. The Insurance Fraud Taskforce did have some strong recommendations on fraud prevention, but claimant lawyers need to be more involved and engaged in bringing forward some practical measures to both discourage and identify fraudulent activity. The Government needs to get a grip of whatever the legacy vehicle is going to be to ensure that the recommendations of the IFT are delivered and soon.
Q Will the proposed reforms have an impact on cold calling and claims management companies?
I’ve said it before and I’ll say it again: The proposed reforms will have a very real and damaging impact, fueling cold calling and boosting CMCs. The revenue of CMCs in the PI sector is still over £200 million. We know that CMC generated claims are more likely to be cases older than 12 months, and we know that these cases are more likely to be fraudulent or exaggerated. Complaints about automated cold calls and SMS’s may have fallen, but PI still vies for the top slot for the sector, generating hundreds of thousands of unwanted communications. If the reforms proceed as planned, we could end up with precisely the opposite of what is supposedly intended. The bad CMCs will do all they can to ensure that ‘minor’ injury claims exceed the cap and become ‘tariff’ claims, and push the value of other claims above the new SCL - increasing the cost to the insurer and increasing the CMC’s share of the policyholder’s damages. CMCs are already talking publicly about adapting and changing their business models to get around the reforms. They are rubbing their hands in glee at the prospect of solicitors being forced out of the claimant sector. There should be a complete ban on cold calls and CMCs must be properly regulated. I’m pleased that the claims regulator is going to get additional powers to deal with individual directors rather than companies, which can disappear and be re-formed virtually overnight. There is a huge danger that with the process of transferring responsibility to the FCA taking so long, probably not happening until 2018, claims regulation will continue to be under resourced in the interim. If these reforms do go ahead, the FCA will need to invest heavily in CMC regulation, but I fear that it will get lost amongst their many responsibilities.
Q What changes should the Government make to the claims sector to improve access to justice?
We need to make the system work better for the genuinely injured and non-injured motor accident victim, reducing the negative impact of CMCs, improving the quality and speed of medical reports through an improved MedCo and getting them the right support quickly and as efficiently as possible. There are characteristics and bad behaviour across the sector that make it difficult sometimes for claimants, and we must work together to tackle these.
Looking at the bigger picture, the general shift to the delivery of online legal services will probably be beneficial to the majority, but great care must be taken not to leave the most vulnerable behind. Ofcom figures show that across all demographics, 12% of the population are still ‘non-users’ of the internet, including 30% of 65-74 year olds, 67% of the over 75s and 25% amongst the social grade DE. It must not just be assumed by the professional classes that everyone can access and use the internet, because they clearly can’t or don’t know how to. This problem is not going to just disappear soon but will need addressing for many years to come.
Q How do you feel insurers can work to lower premiums for their customers?
The reality is that several factors have contributed to the current levels of motor insurance premiums. Blaming high motor insurance premiums on accident victims, whether fraudulent or not, is plain dishonest. Premiums have crept up again because of the recent increases in IPT and the cyclical nature of returns from motor insurance. Whilst there are clearly some costs associated with fraud, I think it is highly suspect that the reforms will deliver the sort of scale of savings that insurers are after. The costs of the new world after the reforms, when insurers will effectively have to deal with claimants directly and possibly face an increase, not decrease, in claims, will be pretty much negated. There are undoubtedly excessive costs throughout the system that need to be addressed, such as inflated costs in repair, credit hire and rehabilitation. I’m glad to see that the MoJ’s consultation asks for opinions about these areas as well, although they unfortunately make clear that they’re not planning any immediate action.
Q How can collaboration be improved across the sector?
Having been closely involved in the discussions that led to the introduction of askCUE, the key lessons I learnt are that a productive collaboration can only be achieved through calm, professional and, to be blunt, grown-up discussions that build trust. Some of the exchanges from both sides over the last few months have been woeful and downright childish point scoring. The track record of previous reforms, such as LASPO and MedCo, shows how ill-considered and predominantly one-sided agendas that fail to actively engage with all sides either do not achieve their objectives or have needed substantial revision. For instance, LASPO is still not being properly enforced to stop referrals by another name from CMCs to some law firms. The reality is that there is a lot more agreement within the sector than might at first be apparent. We need to sit down and talk, focusing on what we can jointly achieve and respectfully disagreeing where we have alternative views. There does appear to be an appetite for both sides of the debate to explore how a fair and workable system can function for genuine people and I strongly welcome any progress that can be made.
Q What’s next on the horizon for Carpenters?
Our aim has always been to assist clients in their time of need. We will continue to work closely with our broker and insurance partners to ensure their customers receive the support and customer journey they deserve and rightly expect. We will continue to actively fight fraud and work in a professional and transparent way.
Our on-going focus on investment in our team and systems will ensure the continued enhancement of the customer’s journey. Clearly there will be challenges to do this in a changing environment with future reforms and technological developments, but our aim throughout the discussions relating to the reforms has always been to ensure the rights of the genuine customer to proper representation.