Last week was a big week for the insurance industry: a Downing Street ‘summit’ between the PM, other Ministers, the ABI and insurers. The insurance industry’s opportunity to garner the PM’s continued support to influence policy on ‘fictitious whiplash injuries’ and the irresponsible attitude of claimants over ’trivial’ injuries that are adding £90 to the cost of each of our insurance premiums and the stranglehold that the ‘compensation culture’ (which, *ahem*, doesn’t exist) has on business.
The ABI, supported by the Prime Minister have a raft of measures to eliminate these ‘trivial’ claims from the landscape delivering the savings back to you and me in the form of reduced premiums. Reduced premiums in these pressing times can only be a good thing of course and here is a taste of how they propose to do it:
A minimum speed threshold akin to the German system that prohibits whiplash claims for speeds below 6mph (10kmph), following the German theme the use of 2 medical reports to evidence a claim of whiplash, court appointed impartial experts to assess claims, in-car monitoring for young drivers and a reduction in available legal costs.
It’s certainly a package of measures that appears on the face of it to offer some solutions if whiplash needs to be brought under control but here are some of my thoughts:
Speed as a benchmark – I’ve already blogged rather light heartedly about this subject but it’s a real issue because only the driver of the vehicle moving along the road knows the speed that they are doing so if you introduce a speed threshold what happens to the claimant’s position? The claimant says that they believe the other driver (who, in a whiplash claim will probably be driving behind them) was doing over 6mph and the other driver disputes it. Before you even get to the evidence of injury you’re in a dispute about whether the threshold test has been met. Anybody wanting to protect their no claims bonus and prevent a claim has a vested interest in stating their speed at 5mph. There has been talk about the use of black-box technology but this doesn’t come without a price tag; either as the cost of purchasing and fitting a unit or the enhanced cost absorbed into the price of a new car. The evidence over speed is still not ‘held’ by the claimant with whom the balance of proving the claim lies. A benchmark designed as a gateway to claim becomes what we have all too frequently encountered in civil justice – a new point of ambiguity within a sea of process and certainty. This proposal needs practical attention.
Use of 2 medical experts – an interesting idea and one that offers possibilities but, if the need for the doubling of evidence is driven by a need to reduce cost how is this not going to increase rather than reduce the end-cost? It may be a concept that is aimed at reducing the number of claims (so it’s prohibitive) but once you couple the idea with qualified one way cost shifting (the insurer pays costs win or lose) isn’t the insurer just increasing their own bill, costs which will be passed on to the policyholder?
Court appointed impartial experts to assess claims (Dr Whiplashes)? Without more meat on the bones it’s difficult to know what is meant here and where these individuals would sit in the process but it would appear these experts are intended to replace those with medical qualifications already considered ‘experts’ under the Civil Procedure Rules.
In-car monitoring for young drivers attracts similar comments to the speed related telematics mentioned above. It sounds like a good and reasonable idea but it will cost money to implement. Premiums may be reduced if it’s available but achieving the required monitoring isn’t cost neutral. The motorist will be put to cost albeit outside of premium costs.
And finally, the ever present required reduction in legal costs. The ABI are very fond of the ‘for every £1 of compensation they pay 87 pence in legal costs’ statement. It sounds disproportionate doesn’t it, particularly when you think about a £1000 whiplash claim? But costs have been fixed in RTA cases since 2005, the only thing that changes the entitlement to fixed fees is behaviour that forces the claim out of the fixed-costs regime, behaviour that insurers are able to control. Claims settled, with medical evidence under the RTA portal attract fixed fees of £1200. This is for claims up to and including a value of £10,000 and there are plans to extend it to £25,000. So claiming £1000 or £10,000 your right to claim fees is the same. So applying the principles the ABI like to use in a £10k portal claim for every £1 they pay in compensation they pay 12p in legal fees to the Claimant, in a £5k claim they pay 24p in legal fees. The ABI obviously wouldn’t put the 87 pence figure out there unless they could substantiate it (and its not clear whether this includes the insurers own legal costs, for instance) but keep a claim within the RTA portal process by complying with the rules and timescales and the fixed costs agreed by the insurers following long, detailed and costly negotiations allow insurers to control legal fees. If that can’t be achieved and the claim falls out of the RTA portal it moves into another cost regime where legal fees are predictable. Larger disputed cases will naturally attract larger legal costs.
So to roll back to the good intentions coming from the PM’s meeting the insurers have confirmed that they will pass on savings to the policyholder. “Hurrah” I hear you cheer but let us not forget that achieving these savings will cost more than few pounds and pence.
The press has been full of quotes about the rising cost of insurance premiums and the average cost is now given at £410 and more than triple that for young drivers (figures do vary depending on which articles are read and whether a ‘quoted’ premium costing such as used by AA is referenced). A reduction by anything has got to be a bonus and if these proposals reduce the premiums we pay, at the bottom line it will feel like a good thing but will the insurers actually pass on the savings? Well it seems yes, they will and, as reported in the Telegraph on 15th February 2012 the insurers say that premiums could fall by as much as £90, the exact cost insurers say is currently added to each premium to deal with whiplash claims. So, does this mean that these plans are designed to eliminate whiplash entirely or is the £90 reduction to some other element of the premium?
I wasn’t lucky enough to be invited to the PM’s meeting but my views, for what they’re worth, are that charity always starts close to home and there are steps that can be taken today that would allow the insurers to positively influence our premiums outside of reducing the large sums of money that are spent on advertising. The ABI is a very strong body representing a united industry with the stated aim of reducing premiums, fraud and exaggerated claims. The ABI could rapidly achieve consensus by demanding change in their membership’s behaviour through their own regulatory arrangements. They can reduce the number of whiplash claims going into the system through routes and behaviours they condemn in others; banning third party capture, the selling on of personal data, prevent charging agreements that layer cost, agree and stop charging and receiving the referral fees that the industry so abhors, stop making early direct to claimant cash offers and challenge behaviours of individuals or experts that they consider exaggerated and fraudulent. Because some insurers are complicit in all of the behaviours they still want you to believe are the sole preserve of claimants and their lawyers and the dreaded ‘claims farmers’. Once this is done and we start to see the natural reduction in premiums arising from the insurers self guided and achievable moves then continue to challenge and control the behaviour of others. Because, at the moment, what the ABI demand is change on the part of everybody but their own members.
I think it’s important for me to be clear that I do have an personal interest in the subject not only as a driver (and parent of a soon to be young driver) but as a former personal injury lawyer and now an employee of a claims management company. I’m one of those people who believes in access to justice and that the use of intermediaries and out-sourcing is a normal everyday part of business. I believe that there are bad behaviours across the industry which must be corrected and fully support (and have been involved in) action to stamp out fraud. I also believe that whiplash is a painful and debilitating injury and to trivialise the injury and its effects are disingenuous.
The trade press has been full of buoyant reports following the meeting with the PM and I was particularly taken by a quote from Paul Evans, CEO of AXA published in the Post Magazine. Mr Evans said “I am encouraged by the attitude of the PM because I do a lot of lobbying of government in my job, and sometimes you struggle to get heard, but he showed a real interest in getting things done. By the end of the meeting there was nothing left on the table and on every point we raised he quickly designated a minister to take responsibility for taking the issue forward. It was a real call to arms.”
If Mr Evans struggles to get heard then what about the Claimant? Not a single claimant representative body or group was at that meeting to discuss the future.