Modern Claims Magazine Issue 15 by Charlton Grant

Linking the Industry Together

September 2015 | Issue 15 | ISSN 2051-6495 Legal sector M&A – Deals, due diligence and ‘diamonds’: Zoe Holland explains why due diligence should play an important part as M&A activity continues. Foreign law and claims abroad: Mark Lee, a leader in the field of travel law and a partner at Penningtons Manches, identifies the key issues to consider when handling a foreign accident claim.

Modern Claims Magazine | September 2015 | Issue 15

“Staying ahead of the game is a challenge that requires a balance between being visionary and understanding the cost and benefits to our customers and ourselves”

Wendy Foley

ROGER FLAXMAN

“[The Insurance Act 2015] puts pressure on commercial policyholders and their brokers to make enquiries within their senior management about material facts that ought to be have been disclosed”

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s we approach the end of 2015, the time has come once again to take stock and reflect on the developments from the year. As many in the claims market know, the most distinctive piece of new legislation this year is without doubt the Insurance Act 2015, which received Royal Assent in February. I spoke to our cover star, Roger Flaxman, the Chairman of Flaxman Partners about how the Act could affect policyholders moving forwards (page 13 onwards). In light of further changes on the horizon, in the form of the Consumer Rights Act 2015, which will come into force in October, I asked Wendy Foley, the Claims Operations Officer at international insurer, AIG about how the organisation has overhauled its operations model in order to sustain an innovative approach to market (from page 17).

the specific challenges associated with their firmsâ&#x20AC;&#x2122; merger on page 59. Zoe Holland also explains why due diligence should play an important part as merger activity continues from page 53.

Having said goodbye to the summer months, now is an interesting time to take a look at the challenges that come when making a personal injury claim abroad. Mark Lee, a partner at Penningtons Manches does just that as he takes an in-depth look at the key issues to consider on page 5455. As movement in the market continues, the Colemansctts, Simpson Millar merger is the latest on a growing list. I spoke to Janet Tilley and Peter Watson, to find out about

Charlotte

Modern Claims Magazine

Outside of the claims market, there are more exciting developments at Modern Claims Towers; nominations are now open for the second annual Doctors Chambers Modern Claims Awards 2016. Last yearâ&#x20AC;&#x2122;s event was a huge success, so I urge you to keep your eyes peeled for further details which will be announced soon and visit our website: http:// www.modernclaimsawards.co.uk/ for more information. The Modern Claims Conference will also return in 2016 and further details will be announced soon. I would like to thank everyone who has helped put this issue of Modern Claims together. If you have any feedback or ideas for a future edition, please get in touch with me via: charlotte.parkinson@charltongrant.co.uk or 01765 600909.

Charlotte Parkinson, Group Editor, Modern Claims Magazine

Issue 15 | September 2015 | ISSN 2051-6495

Project Director Kate McKittrick

Group Editor Charlotte Parkinson

Events Director Julia Todd

Production/Editorial Assistant Charlotte Lamb

Business Development Manager Martin Smith

Modern Claims Magazine is published by Charlton Grant Ltd ÂŠ2015. All material is copyrighted both written and illustrated. Reproduction in part or whole is strictly forbidden without the written permission of the publisher. All images and information is collated from extensive research and along with advertisements is published in good faith. Although the author and publisher have made every effort to ensure that the information in this publication was correct at press time, the author and publisher do not assume and hereby disclaim any liability to any party for any loss, damage, or disruption caused by errors or omissions, whether such errors or omissions result from negligence, accident, or any other cause.

MC // Septemeber 2015

CONTENTS 03-08 Intro & THE News 07 THE NEWS

Nick Parsons and Shirley Denyer explain the possible implications of the DBA Report, which was recently published by the CJC Working Group.

11-20 THE INTERVIEWS 13 Interview with...Roger Flaxman

Charlotte Parkinson, Modern Claims spoke to the Chairman of Flaxman Partners about competition from lawyers in the dispute resolution process, and whether the Insurance Act 2015 puts pressure on commercial policyholders.

17 Interview with...Wendy Foley

Charlotte Parkinson, Modern Claims spoke to the Claims Operations Officer UK & Ireland at international insurer, AIG about why the insurance industry is dependent on innovation and implementing a new sustainable operations model.

21-46 The Opinions 22 Sector Soapbox

Modern Claims’ panel of industry associations tackle key issues in the claims sector.

25 From soup to super-intelligence

Phil Swinburn, slicedbread

25 Outsourcing: the ground rules

Adèle Coates-Lyon, Medical Records UK

27 Too little, too late

Hilary Meredith, Hilary Meredith Solicitors

27 Further changes afoot

Nicola Klimkowski, LAMP Services Limited

29 The simple answer

Christine Hollis, M + R Medical Records

29 Advancing with the cloud...

Phil Hodgkinson, Pure Legal Costs

31 Northern Ireland – A good place to

be doing business

Gerry Lee, P R Hanna Solicitors

31 Harnessing the tools for future

success...

Scott Whyte, Watermans

33 Is the Bar capable of collaboration?

Stephen Ward, Clerksroom and Clerksroom Direct

33 Occupational Disease Claims - A

golden goose or a dead duck? Lesley Graves, Citadel Law

Editorial Columnists Adèle Coates-Lyon Managing Director Medical Records UK

David Simon Chairman Triton Global Limited

Keith Tracey Managing Director Aon Risk Solutions

Paul Shenton Managing Director Just Costs Solicitors

Alan Nesbit Chairman Association of Regulated Claims Management Companies (ARC)

David J Williams Managing Director, Underwriting AXA

Lesley Graves Managing Director Citadel Law

Paul Sykes Managing Director Audatex (UK) Limited

Derek Cooper Managing Director Veracity Claims

Mark Lee Partner Penningtons Manches

Phil Hodgkinson CEO Pure Legal Costs

Donna Scully Partner Carpenters

Martin Doyle Director Amberis ATE

Philip Swinburn Head of User Experience Slicedbread

Emma Holcroft Director 2020 Investigations

Nick Parsons President FOIL

Rob Cummings Manager, General Insurance ABI

Gerry Lee Senior Partner P R Hanna Solicitors, Belfast

Nicola Klimkowski Head of Business Control and Development LAMP Services Limited

Scott Whyte Managing Director Watermans

Alex Bagnall Associate and Costs Advocate Just Costs Solicitors Andrew Gibbons BIBA Board Member & Chair Claims Working Group Christine Hollis Owner/Proprietor M + R Medical Records Darren Gower Marketing Director Eclipse Legal Systems, part of Capita plc David Hertzell Consultant and former Law Commissioner BLM

MC // Septemeber 2015

Hilary Meredith CEO Hilary Meredith Solicitors Ian Summers Business Development Director Sequel

Nik Ellis Managing Director Laird Assessors

Stephen Ward Managing Director Clerksroom & Clerksroom Direct Steve Barrett Head Churchill Car Insurance

Susan Brown Chair, Motor Accident Solicitors Society (MASS) Director, Prolegal Sucheet Amin Managing Partner, Aequitas Legal Founder, inCase™ mobile app Susan Brown Chairman Motor Accident Solicitors Society (MASS) Tina Coles Owner TC Legal Solutions Victoria Rawlings Media and Marketing Manager TRS Claims Zoe Holland Managing Director Zebra LC

35 Autonomous vehicles: assessing

53 Legal sector M&A – Deals, due

the risk

Emma Holcroft, 2020 Investigations

35 Technology: the sky is the limit

Sucheet Amin, Aequitas Legal and inCase™ mobile app

37 ATE advice...

Martin Doyle, Amberis ATE

37 Brokers: educating your customers

David Simon and Amanda Stipetic, Triton Global

approach

Victoria Rawlings, TRS Claims

39 A sting in the tail...

Alex Bagnall, Just Costs Solicitors

Nik Ellis, Laird Assessors

41 What now for the GTA?

Derek Cooper, Veracity Claims

43 Technology: the magic formula?

Darren Gower, Eclipse Legal Systems, part of Capita plc

43 A driverless future...

David Williams, AXA Insurance Keith Tracey, Aon Risk Solutions

47-62 The Features 49 Legal Opinion

Modern Claims’ resident legal experts David Hertzell and Donna Scully tackle the key issues in the claims industry.

Insurance

Many motorists mistakenly think their insurance covers far more than it does, which leads to situations where they are driving unprotected. Steve Barrett reports.

claims function

Claims is firmly back on the strategic agenda for the specialty insurance market. In the current climate, with clients constantly pushing for increased value at the same time as the market is beset by regulatory and cost pressures, ‘more for less’ has become a strategic imperative for many market participants. Ian Summers reports. Charlotte Parkinson, Modern Claims, spoke to Peter Watson, Managing Partner of Simpson Millar LLP, and Janet Tilley, Managing Partner of Colemansctts, following the recent merger between the two firms, to find out more about their motivation for combining their businesses and how the new partnership will work in practice.

61 Stronger Together

51 The Myth of Comprehensive

59 Opportunity with a shared vision

45 Responding to risk

Mark Lee, a leader in the field of travel law and a partner at Penningtons Manches, identifies the key issues to consider when handling a foreign accident claim.

56 Building the world-class

41 Taking an accident scene to the court

For some legal business owners, the flourishing M&A sector opens opportunity, for others it’s time to take stock and think about the impact of deals on the market. Zoe Holland explains why due diligence should play an important part as M&A activity continues.

54 Foreign law and claims abroad

39 Managing your business: a formal

diligence and ‘diamonds’

Increasing collaboration between key stakeholders has resulted in a number of improvements in the management of property claims. Claire Johnson introduces the biennial BDMA conference, which this year will be focusing on the strategies which will provide a framework for the future.

62 5 minutes with...Tania Sless 62 Gregory Abrams Davidson chooses

Proclaim

Eclipse’s Proclaim Practice Management solution selected in 6-figure deal

54 MC // Septemeber 2015

The News

THE NEWS Nick Parsons and Shirley Denyer explain the possible implications of the DBA Report, which was recently published by the CJC Working Group.

et’s be honest, Damage Based Agreements (DBAs) are a technical and dry subject. It was therefore something of a surprise, and a relief, when a speaker at the CJC Jackson Conference in April 2014 raised a hearty laugh around the room by likening DBAs to a Yeti – everyone has heard of them but no one has ever seen one! In the eighteen months since then little has changed. Although the MOJ initially seemed sanguine that there was virtually no take-up of DBAs after new regulations allowed them to be used in litigation outside employment cases in 2013, in October last year, Lord Faulks sought the assistance of the CJC in improving the regulatory framework and a new set of 2015 draft regulations were produced by the Government for the purposes of review. A CJC working group was set up to undertake the review, chaired by Professor Rachael Mulheron. It has now published its report, making recommendations to the Government on reform of the regime. So how might the proposals affect personal injury claims? Use of DBAs by Defendants Under the 2013 DBA regulations it was contemplated that only claimants would use DBAs. Under the draft 2015 regulations prepared by the Government, defendant DBAs are expressly permitted: the references to payment of costs from “the sum recovered” have been replaced by reference to payment from “any financial benefit obtained”.

The Working Group take the view that “financial benefit” means the damages that the defendant would have to pay to the claimant if the claim had been successful – or the difference between the sums paid to the claimant and the value of the whole claim - raising the question of how that should be quantified. Should the “financial benefit” be quantified by reference to the reserve, the amount in the claim form, or perhaps the Schedule of Loss prepared by the claimant pre-settlement? The working group makes no recommendation on which methodology should be adopted to identify “financial benefit”, and instead recommends, generally, that it should be open to the client and legal representative to define “financial benefit” as they see fit, on a case-by-case basis. The report recognises that quantifying it could be very difficult, particularly as the different valuations of the claim referred to above are likely to vary considerably as the case progresses. The Government had included in the draft regulations a cap on the costs a defendant representative could retain, of 25% of the financial benefit obtained by the client. The working party sees no need to adopt the same 25% cap applicable to claimant DBAs believing that, if introduced, defendant

DBAs would have more in common with commercial matters, and that the 50% cap applicable in those cases should apply. The working party assumes that the defendant solicitor’s DBA fee would be calculated on the entirety of the damages ‘saved’ from being paid, including damages for future loss, although it will not include any sums ‘saved’ from the claimant’s costs.

‘The Government’s aim is to ensure that damages for future care and loss should not be included in the definition of “financial benefit” ’ Hybrid DBAs Will law firms be able to make use of concurrent ‘hybrid’ DBAs, working under a DBA in conjunction with a second funding arrangement, for example, by putting in place a reduced hourly rate payable in any event, (no win, low fee). This has been a contentious issue since the 2013 regulations were introduced, and uncertainty on the point has been one of the issues that has deterred the use of DBAs. The Government is opposed to concurrent hybrid DBAs, partly on the basis that it fears they would allow lawyers to increase their costs significantly, without any increase in risk. The Government is also concerned at the potential for unforeseen consequences around hybrid DBAs (and the risk of a new costs war) and intends to examine the issue as part of the post-implementation review of LASPO in 2016-18. The working group was divided on whether there was any reason to prohibit the use of concurrent hybrid DBAs and concluded that the decision was one for the Government. The Government is not opposed to sequential hybrid DBAs, under which a DBA is used to fund one or more of the stages of litigation. For example, an hourly rate could be charged for the investigatory and preparatory stages of the litigation, with a DBA for the later stages or for the trial. This type of DBA is allowed under the Government’s draft 2015 regulations. Use of DBAs pre-issue The MOJ has always taken the view that DBAs cannot be used to fund cases pre-issue, and that primary legislation would be required to allow that. If the DBA Regulations do not apply pre-issue, the working group is concerned that DBAs outside the regulations, with uncapped fees, might be used for pre-litigation work. It recommends that the Government considers making the changes to primary

MC // Septemeber 2015

The News

‘The ‘windfall’ argument was the most compelling but it was also felt that removing the indemnity principle would reduce the incentive for defendants to challenge the validity of DBAs’ legislation the MOJ believes necessary to ensure that the regulations apply to pre-issue DBAs. The Ontario model v the success fee model Under the existing 2013 regulations, DBAs work on what is referred to as the ’Ontario Model’, rather than the ‘Success Fee Model’. Under the Ontario Model, costs recovered from an opponent are deducted from the fee to be paid by the client under the DBA; under the Success Fee Model the sums payable under the DBA are retained by the lawyer in addition to costs recovered from an opponent. Most members of the working group favoured the implementation of a Success Fee Model, “given the several advantages which the Success Fee Model entails”. It suggested that Government policy on the issue be reviewed, although recognised that, if the Success Fee Model were to be adopted, the percentage caps may need to be reduced. The Heads of Damage from which costs can be paid The Government’s aim is to ensure that damages for future care and loss should not be included in the definition of “financial benefit”. The working group notes that the current DBA regulations also exclude various other heads of damage from the costs calculation, including the conventional sum for wrongful conception and awards of aggravated or exemplary damages (for example, in assault claims). It decided, however, not to recommend a change to the current wording, to ensure that the DBA regime remains the same as the CFA regime on this point. Where personal injuries awards are assessed as a lump sum Potential issues arise when a claim is settled by a lump sum with no breakdown of the heads of damage, leaving unclear the sum from which costs can be paid. The working group reports that the MOJ takes the view that the claimant’s solicitor is responsible for ensuring that the settlement specifies the sum paid by way of general damages and the working group makes no recommendation on the point. The indemnity principle The Government’s clear policy is that the indemnity principle applies to DBAs, which has the potential to create difficulties for claimant representatives in cases where 25% of the damages is less than the sums recovered in costs from the defendant. In these circumstances, the defendant will pay less than the assessed costs and enjoy a windfall. Although views were mixed, on balance the working group recommended that the “strength of arguments” were in favour of abolishing the indemnity principle with regard to DBAs. The ‘windfall’ argument was the most compelling but it was also felt that removing the indemnity principle would reduce the incentive for defendants to challenge the validity of DBAs.

MC // Septemeber 2015

Further recommendations The working group also made the following recommendations: • Counsels’ fees, where counsel is not working under a DBA, should always be treated as a disbursement and therefore outside the cap. • VAT should remain within the cap (as at present) where it is not recoverable by the client, but where it is recoverable it should be excluded. • Where the litigant enters into two DBAs, with solicitor and counsel, the regulations should make it clear that the fees of both representatives together must not exceed the cap. • In circumstances where an error results in the DBA being unenforceable, the working party rejected the idea that the regulations might then permit costs to be recovered on a quantum meruit. The group considered it possible that a Hollins v Russell-type remedy might be judicially developed with regard to DBAs, to enable immaterial breaches of the regulations to be disregarded. • The working party considered it unnecessary for an opponent to be given notice that a DBA is being used as a funding mechanism, and made no recommendation for a change in the regulations to require that. It remains to be seen how the MOJ will respond to the recommendations of the working party. If the recommendations made by the CJC are accepted then the amendments to the regulations will make the whole regime clearer, and ought to give solicitors more confidence in using DBAs. Whether they will be regarded as sufficiently financially attractive to the claimant market remains to be seen. With regard to the changes to the regulations allowing defendant DBAs, potentially, this could introduce a fresh dynamic into the relationship between insurers and their panel solicitors. It will be interesting to observe the market’s appetite for such an arrangement. Nick Parsons, Head of Insurance and Public Risk at Browne Jacobson and President of FOIL, the Forum of Insurance Lawyers, was a member of the CJC working group on DBAs. Shirley Denyer is a partner in Shirley Denyer LLP, which is the Knowledge Services Consultant to FOIL.

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The Interviews

11-20

The Interviews

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Interview with... Roger Flaxman

Interview with... Roger Flaxman Charlotte Parkinson, Modern Claims spoke to the Chairman of Flaxman Partners about competition from lawyers in the dispute resolution process, and whether the Insurance Act 2015 puts pressure on commercial policyholders.

Q A

Flaxmans are insurance advocates; what are the benefits of introducing an impartial party into the insurance purchase/claim process?

We only deal with complex or distressed claims. That means the claim is being disputed, or insurers are denying liability and/or voiding the policy. Our goal is to prevent the matter escalating to litigation. Usually, when a case gets to the litigation stage, expert witnesses are called to enable the matter to be judged. This evidence is called upon just before going to trial, and after months, if not years, of litigation preparation. We provide that expert witness opinion up front to prevent the case going to court. Our consultants are highly experienced and seasoned insurance practitioners, with additional skills in mediation. They act as experts to the courts and so they are well placed to understand the commercial, legal and insurance practice issues. In our experience, the majority of disputed claims can be resolved without resorting to litigation. The issues being disputed are usually pure matters of insurance practice and interpretation. Our consultants are very often capable of addressing these just as they would in a court of law. We start by evaluating the facts. Once we find the heart of the problem, we look for resolutions without the need for legal input. We are usually successful. In effect we are reversing the traditional legal process by starting with “expert evaluation”. Of course, if it is determined that legal input is required we can take it to our panel of preferred insurance lawyers. We then work with them to reach a solution for our client.

Our approach benefits both the broker and their client: • The broker gets an early and inexpensive expert opinion from a truly independent trusted adviser; and the policyholder gets the benefit of an experienced insurance practitioner with expert witness credibility. • Our independence is a valuable factor in these matters. Sometimes, brokers may have obligations and commercial relationships with insurers. These can present potential conflicts of interest. We are completely independent. • Insurers also benefit if we can resolve a problem and so avoid costly litigation with their policyholder.

Q A

‘It is rare to find an insurance dispute without a miscommunication or misunderstanding’

What is the biggest challenge that Flaxmans face in the current marketplace? Possibly the biggest challenge is competition from lawyers; who naturally prefer their model of dispute resolution. Our approach seeks to close the gap

MC // Septemeber 2015

Interview with... Roger Flaxman

‘The wrong impression can be given at the touch of a keyboard or a hastily made remark’ between the insurer and insured and prevent disputed claims going to litigation. The impartiality of our position is crucial. If we believe the policyholder does not have grounds for complaint, or the insurer’s opinion is correct we will explain why. Of course, if the client still wishes to dispute the claim we will provide an advocacy service. In these circumstances, we also explain the difficulties that have to be overcome and the prospects of success.

Q A

What are the most effective ways of settling a commercial insurance dispute and why?

The most effective way of settling any dispute is by both parties listening to each other. It is rare to find an insurance dispute without a miscommunication or misunderstanding. The facts are misconstrued and that usually goes to the heart of the dispute. Very often

Flaxmans Flaxmans are insurance advocates specialising in commercial and business insurance advice. The company has over 40 years of experience in this specialist field. It is highly regarded throughout the industry. The company operates a fee based model. Fees are determined from the outset and usually recovered from successful settlements. A commitment to service combined with expertise enables the company to achieve a high settlement success rate. Areas of expertise include insurance law and practice, insurance claims advocacy, claim negotiation, litigation support, mediation and management of distressed business risk and loss adjusting mediation and settlement. In addition, the company designs and implements bespoke insurance packages for businesses or organisations with a specific need (for example where there is no off-the-shelf insurance product available). If required, brokers can also be sourced to place recommended cover with an appropriate insurer.

this is the result of modern, fast and often inaccurate, communications. The wrong impression can be given at the touch of a keyboard or a hastily made remark. It is important remove the emotional aspects from a dispute. That is a particular skill that sits neatly with the mediation and advocacy concept. Most people will come to an accommodation if given an opportunity that enables them to say “yes”.

Q A

How difficult is it to manage relationships with the large number of interested parties Flaxmans deals with, including solicitors, legal counsel, loss adjusters, loss assessors, brokers and insurers?

It is rare that one has to deal with all of these parties at exactly the same time. Part of our skill and art is having a strategy to address the issues in an orderly structured way. It allows you to see the wood for the trees and often some of the earlier perceived problems drop away leaving a much clearer path for a satisfactory outcome. Where there are multiple parties, we don’t have particular difficulty. The skill is in dealing with each party’s issues specifically and in a structured way.

Q A Q A

How large a part is the Expert Witness side to Flaxmans as a business? Approximately 35% to 40% of our business, by revenue, is from expert witness assignments. What type of businesses is the Flaxman’s core client base predominantly made up of?

The majority of the work is commercial insurance and professional liability, directors’ and officers’ liability and corporate risks. From time to time, we are involved in aviation, marine and some high net worth insurance disputes. Our network of specialists enables us to deal with most classes of insurance claims.

Q A

What in your experience are the main reasons insurers turn down claims?

There is no single reason that stands out. Clearly insurers do not want to pay claims for which they are not liable. The larger the claim the more carefully they will look at their liability. From our experience, we find the loss adjuster or a solicitor has advised the insurer to turn down a claim. In these cases, the insurer is obliged to consider the advice provided.

‘[The Insurance Act 2015] puts pressure on commercial policyholders and their brokers to make enquiries within their senior management about material facts that ought to be have been disclosed’

MC // Septemeber 2015

Interview with... Roger Flaxman

‘The larger the claim the more carefully [the insurer] will look at their liability. From our experience, we find the loss adjuster or a solicitor has advised the insurer to turn down a claim’

Q A Roger Flaxman Roger Flaxman is a member of the Academy of Experts and is an ACII Chartered Insurance Practitioner. He has over 40 years’ experience in the insurance industry and more than a decade’s experience serving as an expert witness in matters of insurance practice, duty of care and insurance market procedure.

Q A

How do you work with your clients to improve their risk profiles?

We do not do this very often because our work is mainly concerned with claims. Sometimes, after a successfully managed claim resolution, we will offer to work with brokers on risk assessment. We explain where we think the weaknesses have been in the policyholder’s business and how they might be addressed to improve the profile.

What impact do you expect the Insurance Act 2015 (which received Royal Ascent in February 2015), to have on insurers/brokers?

The Act is not going to change the underlying principles of insurance very much. What is likely to change are the legal benchmarks against which to judge whether a policyholder has made a fair presentation of the risk. Insurance policies are no longer based upon the doctrine of “utmost good faith”. In addition, the “basis clause” has been removed. For insurers this means they have to be even more vigilant about the nature and relevance of material facts disclosed by the policyholders. This puts pressure on commercial policyholder and their brokers to make enquiries within their senior management about material facts that ought to be have been disclosed.

What is in the pipeline for Flaxmans?

We were delighted to be recently recognised by the British Insurance Brokers Association (BIBA) as independent advocates. This enables us to offer our services to over 3,000 insurance brokers. Brokers are naturally concerned when a client has a claim rejected. To have an immediate port of call for a second opinion has proven to be an invaluable service for them. Challenging an insurer is time-consuming and costly for the broker. It also requires a particular knowledge of the principles of insurance law and industry practice. We are working on a solution that will help reduce costs. It is an approach that we believe will have an impact on the broker market. Additionally, the new Insurance Act will create additional burdens for brokers and clients. We have an initiative underway to provide guidance on the implications for brokers and their clients of the provisions under the Act. As an organisation, we are confirmed advocates of the art of professional insurance broking. Our role is to add value to brokers’ client offering. By supporting brokers with specialist information, insights and claims advocacy services, we add substantial value to their service.

MC // Septemeber 2015

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Interview with... Wendy Foley

Interview with... Wendy Foley Charlotte Parkinson, Modern Claims spoke to the Claims Operations Officer UK & Ireland at international insurer, AIG about why the insurance industry is dependent on innovation and implementing a new sustainable operations model.

Q A

What are the biggest challenges for the AIG claims function in the current UK marketplace?

AIG Claims face many of the same challenges that other claims teams in the industry face. These include; • New products with new risks being covered. • Customer expectations on such things as speed of resolution and ways of communicating the progress of a claim. • For Commercial business, the increased awareness at board level of the risk landscape and its impact on decision making. • New and developing ways of communicating with customers, for example digital and social media. The need to contain costs in a highly competitive industry. What’s important is to maintain a keen focus on customer needs and service within this context of an evolving risk and regulatory environment, given that when our customers make a claim it really is the moment of truth for them.

‘Over 90% of our customer facing staff are members of the Chartered Insurance Institute (CII)’

Q A

How does the UK claims operation keep up with the pace of change in the market?

Often Claims is the catalyst for change as we deal with customers when they need us most. Therefore, we are in the best position to recognise what our customers want from us. We have an important part to play in ensuring that AIG maintains an ongoing relationship with our customers. In the UK, we are mainly a commercial insurer covering a broad range of risks from Property to Liabilities risks, as well as Specialty and Financial risks. One innovation we have introduced over the past several years is Claims Account Relationship Managers (CARMs). Their role is to engage with our customers regularly and not just within the context of a claim. For example, they work through scenario planning with risk managers, which means both the customer and AIG as the insurer gain a better understanding of the risks being covered and how they will be dealt with should a claim occur. It may also highlight gaps. Clearly, this has value for both parties and helps deepen and broaden relationships. Training and development of our staff, from new apprentices to those in senior positions, is also integral to the way we work. As a Chartered Insurer, AIG is committed to promoting professionalism and the highest standards within the industry. That means that over 90% of our customer facing staff are members of the Chartered Insurance Institute (CII) and are encouraged and supported to develop their skills through professional qualifications as well as ‘on the job’. MC // Septemeber 2015

Interview with... Wendy Foley

‘Being flexible and proactive when it comes to our service as well as having a good understanding of what our customer needs is key to adapting well in an innovative and technology enabled environment’ What matters is delivering the service that our customers value and technology can certainly help deliver better outcomes. Being flexible and proactive when it comes to our service as well as having a good understanding of what our customer needs is key to adapting well in an innovative and technology enabled environment. Staying ahead of the game is a challenge that requires a balance between being visionary and understanding the cost and benefits to our customers and ourselves.

Q A

What is the risk landscape like at the moment for the UK claims market?

The insurance industry depends on innovation and AIG is well known for developing new products to meet customer needs. Our leadership position in Financial Lines, for example, has its roots in the development of Directors & Officers insurance over a 20 year period. Cyber is often referred to as a new risk but we have been offering cover, particularly in the USA, for over 15 years. What’s new is how it is developing. For example, given the increasing interconnectivity of goods – the so called ‘internet of things’ – there is far more potential for criminals not just to steal information but also to cause damage to property and commercial processes through hacking activity. Our customers need us to rise to that challenge and provide not just relevant insurance but also to help them better understand their exposures and how to mitigate them. After all, prevention is often better than the cure. One of the real benefits of our global reach is that we have experience and talent across the world that we use to help us develop and innovate. Adopting best practice in this way means we can offer valuable insight to our customers, not just about new and emerging risks but also how to manage them.

‘Certainly since the economic challenges of 2008 onward, the industry has generally been more keenly aware of expenses’

Q A

Do you anticipate further consolidation in the UK claims market?

We are seeing a lot of M&A activity within the industry at the moment. Size clearly matters and as one of the largest insurers globally we are in a good position. Continuity also matters to our customers. Constructive personal relationships and having a positive experience with a claim are immensely important in developing and maintaining good and long lasting customers.

‘From product innovation, compliance and regulatory discussions all the way through to Board level, Claims has a seat at the table’

Q A

Has the claims industry fully recovered from the economic downturn from 2008 onwards and how did this directly impact claims handling/operations at AIG?

The insurance industry generally isn’t a bad barometer of economic activity. I’ve been in Claims for more than 30 years working in several countries and one thing is for sure – we will have ups and downs. Certainly since the economic challenges of 2008 onward, the industry has generally been more keenly aware of expenses. We are a leaner, more cost effective industry than we were before 2008, but that’s probably true of most industries. AIG has emerged from the financial crisis of 2008 a much more focussed organisation. Our size and prominent position in insurance worldwide means we have an added responsibility to our customers. The dedication and commitment of our people during those years following 2008 was tremendous and we are hugely proud of our team at AIG Claims who rose to the challenge during some pretty hectic times. Throughout those times, we were able to demonstrate to our customers, brokers and the regulators that nothing had changed as we continued to function normally as a business. Claims professionals are particularly adept at ignoring ‘white noise’ that can distract from the ultimate goal - to manage the claim in front of them. It’s our ongoing ability to pay claims that ultimately reassures customers. In the UK alone we pay out on average over £80m every month. In my 14 years with AIG I have always been proud to work for AIG Claims, no more so during those challenging times.

MC // Septemeber 2015

Interview with... Wendy Foley

‘Staying ahead of the game is a challenge that requires a balance between being visionary and understanding the cost and benefits to our customers and ourselves’

Q A why?

Have operations changed at AIG in terms of strategy and approach to market and if so,

AIG has invested greatly in its claims service in recent years. We have improved our technology with a new claim system, developed a paperless environment and re-aligned our claims professionals by line of business, segmentation and specialised functions, to ensure we have the right skill set appointed on each claim. These changes came from listening to our brokers and clients about what they valued in a claims service. This new sustainable model is fully embedded and allows our claims teams more time to engage with our customers and to make better and quicker decisions.

Wendy Foley AIG Claims & Operations Officer – UK & Ireland Wendy Foley has 30 years experience in the insurance claims industry in Canada, the United States, Australia, and the UK. She is AIIC qualified with a BA in Sociology. She joined AIG - UK in 2001 with an upward progression throughout Claims, and maintains a strong emphasis on ensuring AIG customers have a positive experience when dealing with Claims and Operations. With an award winning claims service, Wendy continues to foster internal and external relationships and develop AIG Claims as a differentiator in the market.

Q A

What part does the UK claims operation play in the wider AIG Group?

Q A

What’s next for the AIG UK claims division?

We continue to ask ourselves what more can we do for our customers to become their most valued insurer and also constantly strive to deepen relationships with our customers and brokers. Our best relationships are ones where we combine ideas and identify solutions to our customer’s needs. From these solutions, we develop new ideas, value adds and direction for future claims interaction. At AIG Claims, we actively look for opportunities to innovate and collaborate with our customers and brokers. We know we have the ability to make a real difference to our customers and their businesses by leveraging our expertise and talent as well as having the enthusiasm and drive to get the job done. We in AIG Claims are excited about the future.

AIG Claims is integral to AIG Group. As Claims is regularly identified by customers and brokers as one of the top reasons for deciding who to select as an insurer, it is very important that Claims has a strong voice in the organisation. In the UK, for example, Claims’ role is extremely important because of the amount of business written and the size and complexity of the risks underwritten. This means that our UK Claims’ teams have a breadth and depth of experience in handling claims associated with these risks. As the UK is such a rich environment for innovation, these changes are often adopted and re-purposed to be used in other regions and countries. From product innovation, compliance and regulatory discussions all the way through to Board level, Claims has a seat at the table. This is particularly evident in the UK where we have the opportunity to make some real change.

MC // Septemeber 2015

carpenters

The Opinions

21-46

The OPINIONS

Sector Soapbox

Sector Soapbox Modern Claims’ panel of industry associations tackle key issues in the claims sector.

A Continuing Focus

he Industry Claims Initiative was conceived by BIBA with the support of cross industry stakeholders ahead of the FCA Thematic review on personal lines claims in 2013 with a view to improving the experience of claims for our customers and it will continue well beyond the conclusion of this years FCA thematic review of commercial claims. The group has three terms of reference which include engaging positively with the FCA thematic reviews, the enhancement of the customer experience and understanding of the claims process and to foster wider public understanding of the role of the insurance industry in meeting claims. Our first meeting was held in early 2013 and since then the group has done some excellent work, which has not gone unnoticed by Government, and was referenced in a speech by Andrea Leadsom, who was the then City Minister with responsibility for insurance, at the launch of the BIBA manifesto at the House of Commons in January 2015. In June of this year we were pleased that the broker representatives of the group who met with the FCA were able to speak directly with Simon Green, Director, General Insurance & Protection at the FCA, John Parker who headed up the Claims Thematic Review and Tim Humphreys who was also involved in producing the report. The Regulator’s findings were discussed by the members, which includes representatives from insurers, brokers, loss

adjusters, loss assessors, the ABI and other stakeholders from within the industry, all of whom are referenced to some degree in the FCA report. Under-insurance was found the be prevalent in around 20% of cases reviewed, which applied to both property sums insured and also business interruption. BIBA has already been working on what would be called PI Book 6, which is looking to identify how brokers can play a part in giving better advice and guidance to customers on how to avoid under-insurance and the consequences of under-insurance in relation to claims. BIBA has already contributed to a guide called Small Business Insurance for Dummies and is also looking to develop existing links for the Federation of Small Businesses with a view to promoting the message of arranging insurance at the appropriate sums insured to avoid under-insurance, which is something in which the FCA have already expressed an interest. The wider group has already made great strides in many areas and have contributed to the issue of the AXA transparency guides, now numbering over 30 on a variety of business classes of insurance, one of which deals with issues surrounding under insurance. Aviva’s “Road to Reform Initiative” to reduce payments for soft tissue injuries and the group has contributed to the discussions surrounding the Insurance Act 2015 with the Law Commission. Andrew Gibbons, BIBA Board Member and Chair of the Claims Working Group.

Back to the future? The CMRU said the CMC sector was now “the smallest it has ever been since the early days of regulation in 2007”, yet income in the year 2014/15 was recorded at £310m, an increase from £238m the previous year. Do you see the number of CMCs increasing again now the market has stabilised?

he figures from the MOJ show that they are currently receiving around 25 new applications per month, and of these, 40% are personal injury and 60% are financial services. It remains to be seen how stable the market remains, the insurers have started their campaign to increase the small claims limit all over again, with poor Esure claiming that the lack of referral fee income has significantly affected their profits…sorry, I meant the apparent rise in personal injury claims having significantly affected their profits. It is not clear how far this government (now it has a mandate all of its own) are prepared to go to support the powerful insurance lobby. Nevertheless there is of course continued growth in the areas of financial services, the PPI debacle remains alive and kicking and the next area is package bank claims that the CMC’s are beginning to market and claim for. There remains a growing

MC // September 2015

black market of CMC’s who are simply not operating under the regulatory regime. The Claims Management Regulator is providing further resource at their Unit in Burton to tackle this issue and have already made several prosecutions. Should the Small Claims Limit go up, then expect the number of CMC’s to vastly increase as they begin the process to capture the market that will be likely vacated by the law firms. I expect a market similar in style to the US personal injury market (albeit with lower damages) but with Contingency Fee Agreements at around 50% of damages being the norm. In any event, if the market does remain stable then I expect the growth to continue, however without a market sea change like the Small Claims Limit I do not expect figures to get anything like as high as they were at their peak. Alan Nesbit, Chairman, Association of Regulated Claims Management Companies (ARC).

Sector Soapbox

MedCo: give it a chance

edCo is not popular at the moment. It is causing difficulties for MROs, and the MoJ Call for Evidence that closes on 4th September was triggered by the side-effects of the way the MedCo Portal has been set to operate. Claimant lawyers are also experiencing difficulties with the system, most of which also relate to the way the Portal operates. For example law firms report their searches for an MRO returning either the same agency under seven different names, or seven agencies they have never heard of, requiring them to contact at least one of them in order to set up an account and agree terms before they can proceed to instruct. More worryingly, they report being offered experts 30 miles away from their client, a journey that could present a real obstacle to an elderly or disabled claimant. We need to try not to lose sight of the fact that MedCo has not really even started to do what it was set up to do. The core objective was to improve the quality of medico-legal reporting in whiplash claims. As part of that, the MoJ considered it necessary to sever financial links between solicitors, MROs, and medical experts, but that

was just one factor. This aspect has dominated the initial days of MedCo, but the other elements, in particular the accreditation process itself which will be in place in January 2016, and the processes around auditing individual experts, are being developed, and have the potential to make real improvements so that the report gives a true indication of the injury the claimant has suffered. For the MoJ, MedCo and the Whiplash Reforms are primarily about reducing the cost of motor insurance. It appears from recent press reports that insurers say increasing numbers of RTA claims are affecting their profits, and that premiums will rise in coming months. MedCo will take time to effect change, and realistically until the accreditation and auditing elements are in place, it is unlikely to have any impact at all on claimants or claim numbers. MedCo will have an impact if it is given a chance to work, and, alongside other measures to drive fraudsters and opportunistic claimants out of the system, has the potential to deliver an improved system for both insurers and injured claimants. Susan Brown is Chair of the Motor Accident Solicitors Society (MASS) and a Director of Prolegal.

The Thin End of the Wedge?

ho’d have thought it? In January, the Government introduced “enhanced court fees”. These are the fees Claimants pay to issue court proceedings or to make applications to court during a civil case. The increase was substantial, raising the cost of issuing proceedings on cases with a potential value of between £10,000 and £200,000 to as much as £10,000. Government made clear this was a revenue-raising exercise in a time of austerity. The objective was to raise £120 million per annum to be retained to improve the court system. Virtually all lawyers in the civil justice system including the senior judiciary, The Law Society, the Bar Council and professional bodies such as FOIL opposed the increase. Their shared view was that access to redress should be available to all, not just those able to fund the now significant cost of pursuing a claim. FOIL was further concerned that ultimately much of the additional cost burden would fall upon our clients - the insurers, indemnifiers and self-insureds when they settle issued claims. Now, a few months later Government is returning to the well with another consultation proposing further increases in issue and application fees. In particular, a decision has been taken to increase the cost of an application to the court by between £50 and £100 per time; and a further consultation has been launched proposing the maximum fee level to

issue proceedings rises from £10,000 to at least £20,000. Significantly, a decision has been taken to exclude personal injury and clinical negligence from the proposed issue fee increase. Nevertheless it remains a concern that yet further costs will be charged through increases to application fees. Government clearly sees court fees as a legitimate revenue source. For now, claims below £10,000 have been exempted from the increase but there must be real concern that this decision will be revisited. The vast majority of money claims fall into this category so the financial impact for insurers, indemnifiers and self-insureds when they settle claims would be significant. Beyond the costs consequences there is another philosophical and practical implication. If individuals are treated as consumers paying for just another service (rather than citizens exercising a democratic right to access justice) they might start behaving that way and complain when the service does not live up to expectations. Government says it is reinvesting all proceeds from increased fees into improving the court service, which would be very welcome. Judging by comments FOIL receives from members, complaints about the quality of the courts’ administrative service and the resulting delays and additional cost to court users are on the rise. Nick Parsons, President of FOIL and partner at Browne Jacobson LLP.

MC // September 2015

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The Opinions

From soup to super-intelligence

he single property that has given humans a dominant advantage over any other species is not muscle or speed, but intelligence. An intelligence that has taken billions of years of evolutionary processes such as reproduction, mutation, and selection to advance simple organisms; swimming around in a primordial soup, to the intelligent modern humans of today. It is at this current juncture where humans are working to bypass the constraints of physics and biology, in order to transpose intelligence into machines capable of surpassing the abilities of humans. In fact, if progress in artificial intelligence (AI) continues unabated, AI systems will exceed humans in every aspect of reasoning ability. Through the looking glass… The idea of inanimate objects coming to life as intelligent beings has been around for centuries. The ancient Greeks had myths about robots and Egyptian engineers built automatons and even the first cuckoo clock. Since the phrase AI was first coined in 1958, the field has been plagued with a number of ‘AI winters’, as investment dropped in line with commercial failure. Interest was revived in the 1990s when IBM’s Deep Blue became the first computer to beat the chess grandmaster Garry Kasparov in 1997. We now find ourselves in the midst of AI revolution, where intelligent machines autonomously manage complex operations of financial trading and cyber security, through to self-driving cars, and watches that can track, measure and diagnose health conditions. The central elements of AI are algorithms, which can be trained over all available data to learn and build complete experiences. As a result, AI enables professionals to simulate and stress-test vast numbers of possible scenarios, in order to accurately identify strategies that are highly resilient. As AI algorithms come to rival humans in deduction and design, new opportunities will emerge for the outsourcing of human labour to the AI algorithms themselves, whereby all of the work may be done by smarter-than-human systems. To infinity and beyond… When smarter-than-human systems start to determine progress, there seems no reason why progress itself would not rapidly transform and cascade beyond both human comprehesion and control, leaving human abilities far behind. Many see this as the single most important point in human history and the beginning of the end for mankind. “If a machine can think, it might think more intelligently than we do, and then where should we be? [Alan Turing]. Phil Swinburn, Head of User Experience at slicedbread.

Outsourcing: the ground rules Why should a law firm consider outsourcing its pagination prior to litigation and what should a law firm be looking for in a supplier they instruct?

o be successful with any litigation, preparation from the outset is the key, more especially with the complexities involved with Clinical Negligence and Personal Injury litigation. Because of this, more and more law firms are now outsourcing the collation and pagination of medical records. But what are the ground rules to follow? The best companies in this field sort and update records accurately and quickly. This involves sorting the records in such a way as to allow the person completing the task to continuously double-check their work but not exacerbate the time taken, resulting in maximum quality and maximum efficiency. Adding Value A good pagination company can add value to a law firm’s bottom line due to the fact that the pagination company’s reasonable time can be reclaimed at the fee earner rate. It means solicitors are free to complete other important tasks. Electronic records Electronic records are the way forward: these are a time saver if the electronic records are searchable and a money saver as they permit free ease of access for all people involved in the case – no photocopying costs, no courier costs, no loss of integrity of the records. Bespoke requirements It is vitally important that each set of instructions undertaken is individually tailored to the specific requirements of the instructing solicitor. Fees should also be agreed in advance before proceeding. Communication A flow of communication between the pagination company and the instructing solicitor is also important. Fixed Fees In the current financial climate, you should also be looking for your supplier to offer deferred payment. Some suppliers may offer “no win, no fee” for a premium to reputable law firms with a proven track record. It is advised that a pro bono expert opinion is sought prior to instructing the pagination company. Another way around the fixed fees issue is using a pagination company who will “loan” you a member of their staff to come and work in your office as a temporary member of staff. This way, the work undertaken is not classed as a disbursement. Adèle Coates-Lyon, Managing Director, Medical Records UK.

MC // Septemeber 2015

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The Opinions

Too little, too late

Further changes afoot

Following the death of three army reservists on Brecon Beacons - with the Inquest ruling that they died as a result of neglect – should the Ministry of Defence (MoD) still be immune from prosecution following non-combat deaths and breaches of health and safety legislation?

The FCA published its review into delegated authorities at the start of June. In it, the watchdog warned that insurance boards using delegated authorities must take a more active role in their oversight. What role do compliance managers have here?

ver since 6 April 2008, companies and organisations can be found guilty of corporate manslaughter as a result of serious management failures resulting in a gross breach of a duty of care. The Act removed the Crown immunity that applied to the previous common law corporate manslaughter offence but there is an exemption for Special Forces so the MoD cannot be held accountable for the deaths of James Dunsby, Craig Roberts and Eddie Maher. Furthermore, the MoD cannot be prosecuted for breaches of health and safety legislation. The four week inquest heard a catalogue of shocking evidence that candidates did not have sufficient water supplies, were collapsing from heat exhaustion prior to the deaths, that no readings were taken from a Wet Bulb Globe Temperature monitor (in breach of the military’s own guidance), that such guidance had not been read or adhered to by military personnel and no training was delivered on its contents. Risk assessments were insufficient and therefore dangerous and the tracking devices worn by participants did not work effectively and there were emergency accessibility issues, which resulted in significant delays in the injured soldiers receiving medical attention. Expert evidence from Professor Havenith suggested that if the exercise had been cancelled (in line with MoD guidance at the first sign of heat injures) or measures had been taken to remove Corporal Dunsby for treatment of his heat injury, he would have survived. In delivering her verdict, HM Coroner, Louise Hunt reached damning conclusions in relation to the planning and organisation of the march but also on the MoD itself, its culture, systems and approach to health and safety and failure to learn lessons from previous tragedies. While the Corporate Homicide and Manslaughter Act provides a number of specific exemptions that cover public policy decisions and the exercise of core public functions, the Special Forces’ blanket protection from prosecution needs to be withdrawn. Although the Government has formally apologised to the families it is too little, too late. The MoD is currently exempt from HSE prosecution completely as it enjoys crown immunity and is not accountable by law for health and safety breaches. This needs to be urgently revisited, which is why I am currently corresponding with the Select Defence Committee looking in to the Brecon Beacons. Hilary Meredith, CEO, Hilary Meredith Solicitors Ltd.

he FCA published its Thematic Review TR15/7: ‘Delegated authority Outsourcing in the general insurance market’ in June. The term ‘delegation’ is used by firms to describe where an outsourcing activity is taking place. At this stage it is worth stating what the Handbook (https://fshandbook. info/FS/html/handbook/Glossary/O) defines outsourcing as “the use of a person to provide customised services to a firm” (other than a member of the firm’s governing body or an individual employed by the firm) or “an arrangement of any form between a firm and a service provider by which that service provider performs a process, a service or an activity which would otherwise be undertaken by the firm itself”. Taking the above definition into account, a variety of business models have evolved by insurers and intermediaries in highly competitive environments to achieve the needs of customers. This involves outsourcing functions to third parties, which can take place at the beginning of product development, right through to complaints handling, at the end of a products life. ‘Outsourced function’ can cover a broad spectrum of functions, which is dictated by a firm’s business model. The Thematic Review highlighted that underwriting, claims management and complaints handling were typical functions outsourced by insurers. The findings of the Review must be carefully considered by compliance departments as the Regulator has raised a number of concerns about customers not being treated fairly and poor customer outcomes, in addition to firms failing to understand and appreciate their regulatory obligations. Compliance departments have a massive responsibility to help the business achieve the correct regulatory outcomes, which will be underpinned by a robust audit, risk and governance framework. Systems of controls should extend to and incorporate third parties they outsource to because the delivery of the service should be a seamless experience for the customer. This can be achieved through compliance monitoring, oversight and conduct focused due diligence. It is also critical that meaningful management information is received, shared and acted upon. The findings of this Review will help firms look at their own business models to consider what changes they will need to make to be compliant and ensure that customers are treated fairly, given that the regulatory landscape will change further, with Solvency II on our doorstep. Nicola Klimkowski, Head of Business Control and Development, LAMP Services Limited.

MC // Septemeber 2015

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The Opinions

The simple answer...

Advancing with the cloud…

How can cloud based software support claims professionals, particularly in terms of managing regulation?

ong working hours, high caseloads, anxious clients, court deadlines, targets not met, sound familiar?

Even today with clinical risk strategies in place copy notes are rarely provided in a meaningful order. To the untrained eye, a set of medical notes can be confusing and mistakes can easily be made in attempting to put together a cohesive bundle of records. Mistakes may have implications for the case in hand and prove costly in the long term. Section 3.5 of the Pre-Action Protocol for the Resolution of Clinical Disputes states ‘at the earliest opportunity, legible copies of the Claimant’s medical and other records should be placed in an indexed and paginated bundle by the Claimant’. Therefore, in accordance with the pre-action protocol, medical records should be indexed and paginated at the pre-action stage and in most cases prior to the instruction of an expert. What to do then with that weighty pile of medical records which have no order and from which one is expected to deduce a coherent response to a client’s questions, or to draft meaningful letters of claim or instructions to experts or counsel? The simple and most cost effective answer is to outsource the records to an expert collator who is both familiar in dealing with medical records and importantly, who has an understanding of the legal and medical principles involved in any given case. In addition to collating the records, the collator will (if requested) provide a chronology/timeline of events having regard to issues on liability and causation, focusing on the relevant information within the notes. That combined with a cohesive well-indexed set of notes will allow fee earners and experts to find their way around the records easily saving time and cost. In terms of cost, record collation is a legitimate expense incurred in the course of a claim and charges may be treated either as a disbursement or included in the bill as profit costs. Christine Hollis, Owner/Proprietor, M + R Medical Records.

hen the subject of a Cloud based case management system was first broached by our provider, my response was ‘not under any circumstances’.

My feelings surrounding any cloud based IT at that time was very much, that it was dangerous, susceptible to data breaches and hacking, and could have a significantly detrimental affect on my business. Having now spent a substantial amount of time with businesses who use cloud based systems, and also gone through the process of an ABS application with the SRA, it has become very clear to me that, particularly when you intend to have a panel of law firms acting on behalf of your clients, a cloud based system is absolutely imperative. Whilst the initial reaction from panel firms is negative, when we advise them that claims will be set up and handled on our cloud based case management system, and they will have a private log-in, and must process the claims on that system exclusively. However, once they see the benefits, and realize that we work with them to enhance the system and tailor it to meet their needs, they will ultimately find it to be a sensible solution. It is crucial that panel firms are providing the best possible service to our clients, and any firm that is uncomfortable with us having the ability to audit the quality of their work on behalf of our clients, would not be welcome on the panel for that reason. If reputable work providers are to feel comfortable with their panel firms, they will need to be sure that those firms are providing a high quality service to their clients. The SRA and all regulatory bodies are keen to ensure that our industry is providing the best possible service in a compliant manner, and to ensure that firms and businesses who do not have the interest of clients at heart, are no longer within the industry. Cloud based software goes a very long way to ensuring that regulatory and compliance requirements are monitored and met. If you are a work provider whose only interest is to send a claim and get paid for it as quickly as possible, without any concern for the quality of service your customer receives, then I question whether the legal industry is the right one for you, or whether you will still be operating within it in two years time…Cloud based systems are the most efficient form of audit and compliance available today, and extremely cost effective. #ThinkPureThoughts Phil Hodgkinson, CEO, Pure Legal Costs.

MC // Septemeber 2015

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The Opinions

Northern Ireland – A good Harnessing the tools for place to be doing business future success...

ith all the dramatic changes affecting England and Wales, now may be the time to look at options that previously might have seemed a step too far. Certainly, recent progressive developments by the more traditional Insurance based sector, coupled with a trend set several years ago by the big City boys, seem to confirm a pattern has now been established for looking at Northern Ireland (NI) and in particular, Belfast, as the place to be doing business in. Liberty Insurance recently acquired one of the biggest Insurance brokerages (Hughes) in what was rumoured to be a £50m plus deal, and BLM merged with local Belfast firm, Campbell Fitzpatrick Solicitors. These developments follow similar moves several years ago by Pinsent Masons and Kennedys and come on the back of global firms such as Allen and Overy, Herbert Smith and Axiom, all seemingly delighted with their strategy of expansion into NI. The pool of legal talent available in this region has long been a source of local pride, and coupled with considerably lower overheads, with such things as property prices and rents only add to the feel good factor. The region is also now benefiting from the economic recovery and seems set to progress from a change in Corporation Tax that many feel will be set at 12% or less to compete effectively with our neighbours in the Republic of Ireland, who operate within the Euro Zone. From a claimant perspective, the outlook is even brighter, especially when you compare the landscape with England and Wales (E and W). The only change in the post Jackson reforms to affect NI was with the referral fee ban announced in May 2013, with the result that the current legal framework resembles something akin to that that existed in E and W some 20 years ago. Thompsons NI has a formal association with the so named organisation practising ‘inter alia’ PI, and employment law. The claimant sector generally still has recourse to public Legal Aid funding, that their colleagues in E and W can only dream about. Even if this funding becomes a victim to the UK wide public sector cuts, ATE insurance is now available to proven firms via DAS Law and Financial and Legal. All in all, NI is worth a look.

Where does the balance lie when allocating a technology budget, between the cost of running a business and the cost of changing it?

usinesses in general, and those in the claims sector in particular, have been subject to the environment around them changing considerably in recent years. Those who have weathered the storm of change best have been those who have been proactive to anticipating change and been innovative in the way that they have delivered their services. Technology plays a huge part in every area of business and it is essential to embrace the benefits of what it can bring to your organisation rather than fear it. There is a fine balance to be struck between funding the technology you utilise now versus budgeting for what changes or enhancements you will make in order that you can improve how your business is run. It is a big mistake to think that if you plan to stand still as a business that the world in which you operate will follow suit. Even when a business pans a period of consolidation it still has to maintain a degree of development and innovation so that it doesn’t find itself being overtaken by others in the market. You have to accept that how your business is running just now won’t be how it is run in 12 months’ time or more and therefore you cannot exclusively invest in the technology you use today. Anticipating and planning for change is a much less bumpy road for a business than having to react to change within your market. It is also important to remember that technology is (for the most part at least) invented and developed to improve things and for that reason, it should be embraced. If you can make delivering your service easier, faster and better for your clients and staff then you should always look to harness the tools that allow you to achieve this. Scott Whyte, Managing Director, Watermans.

Gerry Lee, Senior Partner, P R Hanna Solicitors.

MC // Septemeber 2015

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The Opinions

Is the Bar capable of collaboration? Collaboration is king for the claims industry and finally, it’s reached the Bar. Yet for it to work, open-mindedness and transparency are essential, as Stephen Ward explains.

ollaboration between service providers and affiliated industries can drive cost efficiencies and service certainties for legal practices. The ABS model is often crafted from collaborations to offer consistency and transparency (as well as shared profits) between all parties and a more sustainable provision to take to the end user. Yet there is very little formal and innovative collaboration offered by the Bar. This is often due to regulation but, honestly, I think the dearth of collaboration is due to a lack of vision by chambers alongside a few cultural barriers to boot. While many chambers struggle to find their feet in the new claims world, we have been working hard with practitioners to understand what they want, above all else, from chambers. It’s less ‘fixed fees’ and more ‘reliability, consistency and capacity’ – expertise and price are simply given factors. We’re often an interesting prospect for solicitors thanks to our national coverage but we like to reinforce our offering in some cases – however this means finding the right kind of chambers to partner with. We need to work with chambers that enjoy strong leadership and a mentality for effective delegated decision-making. Despite the fact that clients are asking for a different kind of support, the Bar is not generally set up to cater for it. Traditional structures often don’t cater for widespread and formal collaboration between sets. So what’s changed? We have found an open-minded partner to work with and a client that embraces our model for advocacy delivery that truly meets their needs, not just meanders around them. The BGL Group has taken a progressive step forwards with us and Parklane Plowden chambers in the form of a two-year contract to provide nationwide coverage of our barrister services for Minster Law’s Fast and Multi-Track claims departments. I’m hugely impressed with the approach taken by BGL group and it’s the first time we’ve encountered such a professional and in-depth approach to modernise the relationship between a firm of solicitors and barristers. BGL Group took a proactive and responsible approach to the collaboration, resulting in a detailed but practical service level agreement, setting out clear and workable guidelines for all parties.

Occupational Disease Claims A golden goose or a dead duck?

he significant investment in the legal sector in respect of occupational disease claims, particularly noise induced hearing loss, was thought by many to be the “golden goose” that would replace losses from the introduction of fixed fees in personal injury work. For many, that investment is yet to pay off and the operational and financial issues involved in dealing with these claims is now impacting on profit and even business viability. This year, Citadel Law has advised on unprecedented instructions for operational analysis and WIP valuations – revisiting WIP valuations in M&A deals. The viability of running these claims is being questioned and we are advising firms in run off, turn around and sale of their caseloads. WIP valuations have been inaccurate, cash flow forecasts have failed to materialise, claims have poor prospects of succeeding and many are now considering cutting their losses and exiting the sector.

So what is going wrong? Our findings demonstrate that the fundamental issues key to running these claims are lacking – the basic ‘knowhow’ of competently risk assessing: • Date of knowledge and limitation • Breach, causation and value. Robust cash flow forecasting is non-existent and ailing disease caseloads requires expert resource to reduce business risk. They are costly to investigate and represent a professional indemnity risk for those without expertise. The result is a sector overwhelmed with claims that have not been run proficiently which may be future professional negligence claims. Financial and human capital The financial and human capital required to make occupational disease claims profitable cannot be underestimated. A reliable work source, expert fee earners, robust risk assessment and a workflow are fundamentals that often lacking. Robust financial and operational management information must provide clear visibility to the value and risk of the work. Overleveraged and overwhelmed? Unfortunately, the effect is a sector overleveraged and overwhelmed, with the following characteristics: • Restricted cash flow • Nervous funders • Litigation funding growth as banks won’t extend facilities • Under settlements • Professional negligence.

A little understanding, honesty and collaboration have long benefited the claims industry and now the Bar can claim and progress some of that success.

The big financial challenge With hefty cash flow and capital requirements, we are seeing WIP and capital lock up causing significant strain, with questions as to whether this work is cost effective and whether investments are safe. As to which are the law firms and investors who will emerge as winners and those that will find themselves having backed a “dead duck”? Only time will tell…

Stephen Ward is Managing Director of Clerksroom and Clerksroom Direct.

Lesley Graves is a solicitor and Managing Director of personal injury consulting law firm Citadel Law.

MC // Septemeber 2015

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The Opinions

Autonomous vehicles: assessing the risks

Technology: the sky is the limit

What could the introduction of driverless cars mean for the insurance industry?

Where does the balance lie when allocating a technology budget, between the cost of running a business and the cost of changing it?

f you thought driverless cars were a new concept, you would be wrong. The Transport Research Laboratory (TRL) have been working on UK vehicle automation since the 1960s. The first driverless car to be tested in the UK was the Citroen DS in 1963. It was proved reliable enough for the engineers to persuade the government to prepare for tests on the M4. The car was steered by magnetic sensors in the front and back and drove along a magnetic rail which was hidden underneath the M4. Since then other manufacturers such as BMW, Mercedes, Audi, Nissan, Ford and perhaps most famously Google, have developed their own systems and they predict that driverless cars will be on the road in this decade. The technology has advanced dramatically since the 1960s. The Google driverless car processes map and sensor information to determine where it is in the world, what road it is on and what lane it is in. It has sensors that help detect different types of objects all around it. The software predicts what the different types of objects around it might do next, for example it may predict that a cyclist will ride past or a pedestrian might cross the road. The software then chooses a safe speed and path for the car, for example it moves away from the cyclist then slows down to deal with the potential next move of the pedestrian.

his is a paradox. It is my personal view that the cost of running a business must include a budget for technology. That budget need not include the cost of implementation and it is probably a good idea to have a budget for research and a separate budget for development/ implementation.

However it is the right question to ask – is the cost of developing and/or integrating a new piece of technology worth the cost of changing it? It is the question that will continue to have business owners scratching their heads because there is an inherent risk of failure with technology. However, can a business afford not to take that risk – my view is no. Ultimately the return on the investment needs to be considered. What is the technology going to do for the business? Is it going to increase sales? Is it going to increase efficiency resulting in increased profit? Is it going to save operating costs? Is it going to enhance customer experience (a value which is hard to quantify but worth considering)? Once the numbers have been crunched, a preliminary view on paper can be made. Now that’s the sensible, methodical approach.

In terms of what the introduction of driverless cars could mean for the insurance industry, according to the ABI, 90% of road traffic accidents are caused by human error and AEB (Autonomous Emergency Braking) which automatically applies the brakes if the driver does not respond in time, has been proven to lower the number of collisions that result in personal injury by 20%. Therefore, it is likely that as driverless cars slowly make their way onto the roads, the number of accidents will reduce. In terms of liability, in the early stages, where drivers are still expected to intervene and override the technology, liability will still rest with the driver. However, as the cars become ‘connected’ to other driverless vehicles on the road and the driver is not expected to oversee or monitor the vehicle, it is possible that liability risk will be transferred and insurance will be based on the risk of the vehicle and the technology itself rather than the ‘driver’.

The other is to follow Sir Richard Branson and his mantra – “Screw it, just do it”. Sir Richard didn’t always look at the numbers…in fact I’m fairly certain on some enterprises he was advised by the accountants not to do it. Yet Sir Richard has always made “gut” decisions. I’m not saying this is a strategy to follow but there is something to be said about “gut instinct”.

Emma Holcroft, Director, 2020 Investigations.

I suspect that readers are probably saying “we aren’t Sir Richard or Virgin” and yes, I accept that. Yet does that really mean that we shouldn’t take a leaf out of his book and look at the possibilities beyond the numbers? Technology needs to be given time and money to help develop any business. With such an approach, businesses will only thrive as they use technology to increase efficiency and profit.

Look at Virgin Trains. He had to really push hard to get the stakeholders to invest in the railway lines to allow their famous Pendolino trains to work at the best…that was a dream laden with cost and risk. For one, I’m thankful that the dream was realised! He’s not stopping there either given his Virgin Galactic project – commercial space travel. I’m fairly certain the cost of this technology far outweighs the cost of running this part of his business portfolio.

Sucheet Amin, Managing Partner of Aequitas Legal and Founder of inCase™ mobile app.

MC // Septemeber 2015

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The Opinions

ATE advice...

he post-LASPO ATE market is still evolving as the products available alter in line with the availability of claims data. We are only now seeing some cases going to trial and it will be another 18 months before Insurers have meaningful data on which to underwrite accurately. MedCo, fundamental dishonesty and increase in court fees has seen a change in Defendants approach to handling cases. All have an effect when considering a case on its merits at the outset and whether that case will be successful AND profitable. Advising the claimant of their options, whether it be ATE, BTE or an agreement to full cost protection by the firm, must be undertaken with a worst case scenario in mind. What appears to be a straight forward case that will settle relatively quickly can in some instances become more complex as a result of Defendants behaviour or additional information unavailable at vetting stage. Some firms choose to self-insure in the firm belief that the cost risk can be covered by themselves. Therefore, as de facto Insurer, they should advise their Professional Indemnity Insurers that there is a different, and greater, risk compared to one which offers the client various options. In the scenario above where a claim becomes more complex and the cost risk increases significantly, the ability to obtain ATE at a later date is almost nil, potentially leaving the claimant without the ability to pursue their case. The choice to insure cases at a later stage (normally liability disputed) causes significant problems from the Insurers perspective. They aren’t receiving sufficient premium income from all the cases and being selected against in respect of the more risky ones. Premium calculation as a result, becomes inequitable for the claimant leaving them and their Solicitor with the decision as to whether to continue due to the threat of unprotected escalating costs. The best advice to a claimant should be to insure all their risk, ensuring that they are provided with cover at a premium is low relative to the damages received. Plus it only deducted if the case is successful. Insurers offer a range of schemes to cater for firms of all sizes that vary in premium. It is important that firms demonstrate that they have analysed the market and made informed decisions in the selection of ATE schemes to ensure that the offering is both competitive and comprehensive. This can prove time consuming and when considered with on-going analysis of the market, administration of the scheme, compliance with reporting requirements and negotiating any claims it becomes almost a full time job. Martin Doyle, Director, Amberis ATE.

Brokers: educating your customers How can brokers/insurers best educate their customers of the disclosure requirements of the Insurance Act?

fter an interminable gestation period, the Insurance Act 2015 is finally with us. The vast majority of changes brought in by this Act will be of benefit to policyholders. However, the Act will also impose new disclosure obligations that must be met. Errors made in this area are directly relevant to all classes of underwriting, and the duty to educate customers as to the changes will primarily fall onto brokers. Brokers, here are some pointers for you. In our view, the information to the insured should include: 1. The content of the new duty – the need to disclose (a) every material circumstance that the insured knows or ought to know, or failing that (b) sufficient information to put the prudent insurer on notice to make further enquiries. 2. How to interpret the new duty in a way which protects Insureds - The prudent advice would be to effectively ignore the “fall back” position (b above) in the new test, and aim to comply with the primary duty in all situations. Similarly, while the Act contains a number of specific exceptions (such as disclosure of facts that would diminish the risk), the safest approach will be for a broker to ignore those potential “get out clauses”, and to advise the policyholder to provide all potentially material information (subject, of course, to the new duty to present the information in a reasonably clear and accessible format). 3. Clear advice on practicalities - Insureds will need to be properly informed as to what searches they should undertake, and the individuals who need to be involved. Insureds and brokers should keep proper records of the search methods used, in order to demonstrate reasonableness in the event of any future dispute. 4. The potential consequences of a breach – Even an innocent misrepresentation could have a drastic effect on the cover. If a higher premium would have otherwise been charged, or an insurer takes advantage of its right to proportionately reduce payment of a claim, this could be devastating. Insureds need to have this drawn to their attention at the placing stage so that their disclosure efforts are appropriately focussed. Ensuring that insureds are properly informed of these aspects at the outset, and that their disclosure efforts are properly documented, will reduce the chances of future disagreements between insurers and insureds thus protecting the broker from the possibility of related claims on its PI policy. David Simon, Chairman, Triton Globel and Amanda Stipetic, Senior Solicitor, Triton Global.

MC // Septemeber 2015

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The Opinions

Managing your business: a formal approach

ll insurance companies have IT systems which they use to issue policies, manage claims, and other internal processes. Intuitively insurance executives and professionals know they must have “reports” to manage their business but a more formalised approach to analytics provides a better, more sophisticated and timely solution.

Some areas that drive profitability include price competition, product segmentation, fluctuations over time, time delay during the claims process, claims reserves held to balance delay issues, cost ratios and premium income. An insurance business intelligence software must enable capabilities to support the necessary business analytics to Monitor KPI’s, loss ratios, loss frequency and cost ratios. The company should be able to monitor all these by all segments as defined above taking into consideration catastrophe costs, which should be separated from premiums for the calculations. It should be able to see these KPI’s on financial year basis or underwriting year basis, to detect any negative trends in the KPI’s and take corrective actions. The same information when viewed by product rating factors should be used to indicate to the company any changes that need to be introduced into their pricing structure. Separating loss ratios and loss frequencies for each product by type of claim is also a useful tool for pricing calculations. Analysing trends by type of claim and behaviour, payments to claim service providers, reserves control and sales and marketing costs can provide an early warning system for potential profitability issues. An insurer having the reporting and analysis tools described above, should be able to control profitability, better calculate pricing, verify that reserves are sufficient, sales performance and business retention are in place, and ultimately improve profitability. Whilst TRS allocate part of their technology budget to run and maintain current systems, we have acknowledged that the market has become more dynamic and a consideration for areas such as core system modification, platform simplification/consolidation and leveraging data more effectively has to be taken into account. Failure to do so leaves you behind. Partnering with Pyramid Analytics has enabled us to analyse trends by types of claim and behaviour, payments to claim service providers, reserves control and sales and marketing costs, and helps to identify early warnings for potential profitability issues. Victoria Rawlings, Media and Marketing Manager, TRS Claims.

A sting in the tail... Has a recent decision imposed a duty on solicitors to advise clients that other firms may do the same work for a lower cost?

n 21 August 2015, The Guardian’s Joshua Rozenberg summarised the matter of A & Anor v Royal Mail Group [2015] EW Misc B24 (CC) in simple terms: “solicitors may be under a professional obligation to tell clients if the solicitors’ fees are potentially twice as high as those of their competitors”.

In A, two children sustained injuries in a road traffic accident. The claims proceeded through the Portal and were both settled for damages of a little over £2,000. The cases were funded by CFAs between the children’s father (as litigation friend) and the solicitors. The CFAs provided for success fees of 100% of profit costs, capped at 25% of general damages. ATE insurance premiums had also been purchased on behalf of the children, each of which was priced at £195. At the approval hearing, the Court was required to determine whether the success fee and ATE premiums were reasonably incurred and reasonable in amount for the purposes of CPR 21.12. In a stinging judgment, the Court concluded that the ATE premiums had not been reasonably incurred and refused to allow these items to be deducted from the Claimants’ damages. The rationale was that the introduction of QOCS and the facts of the case meant that there was, at worst, a negligible risk against which it was not reasonable or proportionate to insure. The Court also concluded that the ‘25% of damages’ cap was precisely that – a cap, not an entitlement. It was held that the litigation friend had not been given adequate advice as to his potential liabilities. The risks of the case did not justify a 100% success fee and the Claimants’ solicitors had failed to provide a contemporaneous risk assessment which should ordinarily be prepared to justify the success fee. This item was therefore referred for a detailed assessment. The ATE point may be distinguishable in future cases but the success fee point is less amenable to challenge. Solicitors are required to give advice in relation to funding, and adequately explaining the reasons for and effect of a success fee falls within this duty. The Court also suggested that a solicitor may be required to advise a client that another firm of solicitors may be willing to do the work without a success fee. Alex Bagnall, Associate and Costs Advocate, Just Costs Solicitors.

MC // Septemeber 2015

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The Opinions

Taking an accident scene to the court

f liability is in dispute or you are going to trial, then it’s imperative that you are well armed with solid evidence in order to maximise your chances of success. An area sometimes criticised by judges is failing to assist the court by obtaining photographic evidence to demonstrate the client’s version of events along with an accurate sketch plan. Whilst unlikely that you would lose a case just because you don’t have a locus report, it does increase the risk of failure. Locus reports add value by strengthening the evidence that underpins the client’s case, dramatically improving prospects of success. Establishing the particulars by reviewing supporting documentation such as police reports, witness statements and claim notification forms, an expert will visit the site of the accident, thoroughly examine, photograph and measure the widths of the roads, distances and any other relevant measurements. How traffic flows, directions of movement, details on traffic systems, road rules and regulations including speed limits, road layout, obstructions, roadside furniture, road surface, gradients and any other salient facts. Computer generated sketch plans provide an accurate map of the incident location showing the claimant and defendant approach with an impact diagram. Sketches can also be brought to life with animation. Moving from pre-set image placements there’s locus in motion, video evidence of both claimant and defendant real time approach to the impact area. A smarter approach to images at set intervals and recorded at driver’s eye level, giving an accurate view of the approach and the peripheral surrounding. Further advancement is the use of drone technology providing aerial views in inaccessible areas to carry out observations or to provide views at virtually any angle utilising high definition photography or video footage. The drone is on way to becoming an essential tool when producing maps with exact measurements, accurate within millimetres and converting them into 3D images. This type of evidence is becoming more admissible in court due to its reliability and precision. An effective expert witness with all these modern techniques can create bespoke CPR compliant reports for individual cases giving the court a greater, more effective prospect of understanding the accident circumstances, to arrive at a decision with ease.

What now for the GTA?

ummer is usually the time that insurers and CHOs lock horns in the annual GTA rate review debate. This year has been particularly challenging in light of the CMA report and recent legal cases, including Stevens vs Equity. So Helphire’s announcement that they were leaving the GTA back in August has certainly added some spice to proceedings! However, the reality once you get below the headlines is that the world of credit hire is here to stay and none of the above recent developments should be seen as fundamental changes. The industry needs to look forward and continue to work together, unless it wants to add in even more frictional costs that won’t ultimately benefit the end consumer – which is what all sides agree they want to see. For large players like Helphire, bilaterals with Top 20 insurers make sense – most of the other current or former large CHOs have operated such arrangements for a number of years. These are not fundamentally different from the GTA but are a further opportunity to streamline the process, reduce frictional costs and ultimately save money. For smaller CHOs and insurers these bilaterals can often involve more work though than the benefits they deliver. In such cases a framework like the GTA works better, albeit it may not be perfect. The alternative - argue on a case by case basis. In this situation, it may well be wise to call on the experience of a suitable third party organisation, such as Veracity Claims, who can provide benchmarking information and MI plus claims handling expertise. This will ensure that credit hire and repair cases are triaged, and those cases that can be settled quickly are, and those where more detailed negotiations are required are identified and dealt with appropriately. So as autumn arrives, will the world of credit hire look transformed? Possibly, but we should all be aware of the law of unintended consequences and should consider carefully whether the world pre the GTA really was a better place for insurers, CHOs, and most importantly the end customer. Derek Cooper, Managing Director, Veracity Claims.

Being armed with the evidence to support your clients claim as soon as liability is at dispute is of the uppermost importance; utilise your expert witness. Modern locus reports can be the key to taking the court to the scene of an incident. Nik Ellis, Managing Director, Laird Assessors.

MC // Septemeber 2015

The Opinions

Technology: the magic formula? Where does the balance lie when allocating a technology budget, between the cost of running a business and the cost of changing it?

’ve seen a range of businesses experience substantial success by spending on technology during market downturns - much to their peers’ initial amazement. I’ve also seen a huge number of businesses benefit from iterative technology spend. And I’ve also seen an unfortunate number of businesses struggle due to an inability to correctly prioritise technology spend! There is no magic formula to allocating budget correctly, maintaining the balance between managing business operations, improving current platforms, and building for the future. But I can safely say that I have never seen a business fail that has put in place a technology strategy - whether that be ‘big bang’ or iterative as mentioned above. ‘Change’ is often seen as a huge and scary thing - often, the initial reaction to change is to turn in the opposite direction and pretend it isn’t happening. But in the claims sector (in particular!) the change in market conditions and legislation is so unrelenting and so rapid that to embrace change can be the only way to survive and thrive. Going back to my opening line in this piece, there is one good example (elements of which should be very familiar to many readers!) where investing heavily in technology to change the business has really paid dividends: • A niche practice in the north-west, at around the time of the big bang of changes in the PI sector, decided to focus in on one particular accident niche. To do this, a large (relevant to the practice’s size) investment in technology was required to automate processes, trim wastage, and build a competitive service offering at parity with other providers. At the time, the owner of the business was broadly questioned as to the wisdom of such a spend; surely she should have been battening down the hatches? By going against the wisdom of her peers, the business was reborn and able to thrive in a new area of operations, aided by a willingness to invest in IT. Darren Gower, Marketing Director, Eclipse Legal Systems, part of Capita plc.

A driverless future How will mobility evolve over the next couple of decades and what will the improvements to vehicle safety mean for the insurance industry?

e are now entering an amazing period of potential change that I believe will bring tremendous benefits to road users, with some people even predicting this will lead to the demise of motor insurance. Whilst I don’t believe those ‘scare stories’, the reality is technology is improving road safety, and that should be reflected in a drop in insurance premiums overall. Automated Emergency Braking (AEB) Systems have been shown to reduce accidents by 15%, and injuries by 18%, and this technology is becoming increasingly common. I know from our involvement in two of the governments driverless cars projects that this technology is just the tip of the iceberg, with more and more developments being made available, initially just on high range expensive models, but then rapidly moving in to general volume production. If AEB can produce such an impact on its own, just think how much safer overall a truly autonomous vehicle could be, with 93% of accidents already clearly identified as being down to ‘driver error’. One of the reasons we are involved in these projects is to understand the impact of future technologies before they hit production, and hopefully to help shape both the insurance products of the future, and the legislative changes that will inevitably be required to see autonomous vehicles on our roads. One of the big issues we need to work on is confidence of the general public in fully or partly autonomous vehicles. Recent events where vehicles have been ‘hacked’ shows that whilst safer in many ways, robot cars connected to the internet of things have a whole new set of risks that need to be considered. One notable article in the US had an eye catching headline: “To fully enjoy driverless cars, first we must kill all the personal injury lawyers!” That is a bit over the top perhaps, but we do need an environment not where there is a perceived income stream of numerous possible interested parties to sue, but one in which there is clarity of responsibility, and fair compensation paid effectively on those increasingly rare situations where people are injured. Hopefully protected by a simple single insurance product fit for purpose, giving peace of mind to the public that a driverless future isn’t one to worry about. I myself am very much looking forward to it. David Williams, Managing Director, Underwriting, AXA Insurance.

MC // Septemeber 2015

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The Opinions

Responding to risk

n a world of rapid change driven, at least in part, by technology and increasing volumes of available data, CEOâ&#x20AC;&#x2122;s risk perceptions also naturally change rapidly.

Commercial organisations are exposed to a range of risks; indeed every decision (especially at the strategic level) has a risk element. It is hardly unsurprising therefore that insurance cannot respond to every risk an organisation faces. Some risks cannot be transferred because the market does not have the expertise or financial capacity (e.g. economic downturn). Indeed, it is not logical or cost effective to hedge all future uncertainty. For example, failure to innovate may be a risk but the solution is with management. Increased competition is a fact of commercial life and it has always been so. Changing customer preferences and emerging risks, however, do push insurers to look at innovative products. The insurance market may not be perceived as being particularly innovative. In fact, there are numerous examples including cyber insurance, political violence, intellectual property and environmental risks, where the insurance market has responded to customer demand. There are good reasons for the perceived slowness of

innovation. Insurable risks naturally have elements of the unexpected and are capable of quantified analysis. Risk changes and awareness emerge incrementally and demand takes time to build. Those phases are followed by data gathering for risk assessment purposes and then product design. There is a natural caution where there is insufficient data to quantify and price the technical risk. A structured approach to risk management, breaking risks down by categories is helpful in deciding the best method of treatment. The Institute of Risk Management has a classic 4 option approach; tolerate, treat, terminate or transfer. Risk management and risk controls are key elements in managing exposures to loss both before and after an event. The key question is what level of risk is a firm willing to accept? Every organisation should have an articulated risk appetite where it sets out by category its tolerance to take risk and suffer losses. For example, for regulatory risk a typical statement might state that there is zero tolerance to breach government or professional regulations. Thus insurance is only one of four options available to treat risk. A quantifiable proposition would attract attention in todayâ&#x20AC;&#x2122;s competitive market. Keith Tracey, Managing Director, Aon Risk Solutions.

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Legal Opinion

Legal Opinion The latest news and views from Modern Claims’ resident legal experts.

An open door? The Insurance Act requires that policyholders present complex information in a ‘clear and accessible’ way. Will this place unnecessary pressure on customers and does this clause leave the door open to unintentional errors?

mproving standards is a key aim of the Insurance Act 2015. That was why the Law Commissions introduced a new obligation into the duty of fair presentation in Clause 3 (3) (b). Not only does the duty cover what the policyholder has to disclose, it also deals with the way in which that must be done. On the one hand, the Commissions were worried about confusing “data dumps” of information, on the other, overly brief and cryptic presentations. The Commissions aim is for the insurer to receive sufficient information in a way that enables it to properly price the risk and agree the right terms so that valid claims are paid. This is not about the volume of information. Many policyholders today are large and complex organisations with a wide spread of different risks. A fair presentation for them will by necessity be complicated and voluminous. Such policyholders will need to signpost their presentations clearly and provide accurate summaries. Inevitably, this will be a time consuming process. However the policyholder will in return purchase a policy where there should be no arguments about disclosure following a large claim. Will this place unnecessary pressure on policyholders? In a sense, the obligation sets out what a policyholder should be doing in any event. An insurer can be misled equally by the way that information is disclosed as it can by the failure to disclose the information at all. In addition, the duty is not absolute. The obligation is to disclose information in a way that is “reasonably clear and accessible to a prudent underwriter”. Perfection is not required. The test is also objective. It is by reference to a “prudent underwriter” rather than the actual underwriter. Is the door open to unintentional errors? If an insurer chooses to write a risk where the presentation is muddled and incomprehensible without asking further questions, or equally if the presentation is excessively skimpy it will be difficult to show inducement later. The risk for the policyholder is allowing a clearly material fact to be hidden in the verbiage or omitted despite proper ordering and signposting. However that is not a new problem and there is no reason to protect a commercial policyholder from their negligence if that has caused loss to the insurer. David Hertzell, consultant and former Law Commissioner, BLM.

Here to stay?

he CMRU annual report published in July this year reveals another shift in the CMC personal injury market. Whilst in decline, the report demonstrates that the market is stabilising and adjusting to the major Civil Justice reforms introduced in 2013. The key figures reveal that turnover is up 27% to £310 million from £238 million the previous year. Applications are on the increase too with the figures rising by 37%. Yet, the total number of personal injury CMCs fell below 1000 during the recent financial year to 979. Despite the sector being “the smallest it has ever been since the early days of regulation in 2007”, the rate at which this has occurred “has slowed” reports the CMRU. The modern day CMC has reinvented themselves. Some no longer apply for Regulation at all by joining forces with solicitors to work in compliant ways in complex marketing schemes without CMC status. The remaining CMCs are consolidating to become larger entities. They are crossing into the industrial deafness markets so the income in the sector is rising disproportionately to the actual number of CMCs. It is imperative that the CMRU take a tough line (as they promise) on CMCs seeking leads to pass to solicitors for such claims. The CMRU introduced new conduct rules in October 2014, which strengthened requirements around submitting claims ensuring leads are legally obtained and claims properly substantiated before being submitted. The number of CMCs is only likely to increase again now the market has stabilised. The smaller CMCs who froze when LASPO was first introduced have now found compliant models for referring claims again and confidence has grown regarding how to avoid LASPO breaches when referring clients. It is unlikely that the CMRU’s new powers to impose financial penalties introduced in December 2014 for Rule breaches will put off new entrants to the market, although an increased number of audits have taken place in the past year. The income in the sector is likely to continue to rise as new CMCs re-enter the market and existing CMCs continue to consolidate and grow. The CMRU reports that not all of the CMCs will be farming personal injury claims though. They say that for some, “the main focus of their business is on providing services ancillary to personal injury. Other accident management activity including recovery, storage, repair and hire, has been proving more profitable than injury claim services.” Only time will tell but it would appear the personal injury CMC is going nowhere for now. Donna Scully, Partner, Carpenters.

MC // Septemeber 2015

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The Features

The Myth of Comprehensive Insurance Many motorists mistakenly think their insurance covers far more than it does, which leads to situations where they are driving unprotected. Steve Barrett reports.

ecent research commissioned by Churchill Car Insurance indicates that policyholders believe they are covered when driving any car for any duration of time, whereas in reality this is very rarely the case. Out of the 2,000 UK adults polled, over a third of those with a driving licence think that a fully comprehensive car insurance policy covers them to drive any vehicle and be entitled to the same level of cover. This means millions of motorists on Britain’s roads could be driving with no insurance. UK licence holders do not seem to worry much about when they are protected, as only 40 per cent have investigated whether their policy covers them when they are driving in vehicles other than their own. In fact, less than a quarter would inform their insurer if they wanted to drive another car.

‘A third of UK licence holders assume they have “open” cover for Driving Other Cars (DOC) with no restrictions whatsoever, but again this is rarely the case’ Reviewing your policy Some insurers include what’s known as ‘Driving Other Cars (DOC)’ cover in their comprehensive policies, normally only applicable to those aged 25 and above. It was created in order to prevent people from driving uninsured when they have to drive another car in an emergency situation; however only 16 per cent of those surveyed understood that the protection is intended for emergency scenarios. A third of UK licence holders assume they have “open” cover for Driving Other Cars (DOC) with no restrictions whatsoever, but again this is rarely the case. It’s therefore vital that people review their motor insurance certificate or call their provider to check if they have DOC cover and exactly what this entitles them to. Even if they do have DOC

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cover, motorists should not rely on it too heavily since it only offers third party cover. If for example, drivers write off the car they are driving, they would be personally responsible for paying the cost of replacing the car. A solution to this problem if people did want to get behind the wheel of a friend or relative’s car is to ask the vehicle owner to call their insurer and get them added as a temporary named driver on the policy. This should normally only incur a nominal amount and will usually afford them the same cover as the insured vehicle. The confusion does not stop with DOC, but extends to being a named driver on another policy, another area that often invites incorrect assumptions. Avoid cutting corners... When being added as a named driver on a policy, motorists should consider the frequency of which they intend to use that vehicle, and opt for temporary cover if it’s only for a short period to avoid paying unnecessary premiums. It’s common practice amongst younger drivers in particular, to add their parents to their policy in the hope that it might bring down premiums, but this is not a given and can actually increase the premium. As a general rule, only those who drive the vehicle regularly should be listed on the policy. While phoning your insurer every time a friend borrows your car might seem like an administrative hoop to jump through, it’s usually a quick and easy process that is hugely important. It can be tempting to cut corners, particularly when there’s a cost involved but not abiding by the guidelines can jeopardise your cover and cost a lot more in the long-run. Unfortunately, the current penalties for driving without valid insurance do not provide enough incentive for people to worry about committing this crime. With court fines averaging £300, there is legitimate concern that not enough is being done to deter people from driving without insurance. The maximum court fine for driving without insurance is £5,000. To put that in context, there is a maximum court fine of £2,500 for littering and £1,000 for failure to pay for a TV licence. Such low levels of fines are unlikely to deter persistent uninsured drivers and could well tempt people into thinking driving without insurance is worth the financial risk. Steve Barrett is Head of Churchill Car Insurance.

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The Features

Legal sector M&A – Deals, due diligence and ‘diamonds’ For some legal business owners, the flourishing M&A sector opens opportunity, for others it’s time to take stock and think about the impact of deals on the market. Zoe Holland explains why due diligence should play an important part as M&A activity continues.

ecent M&A activity within the sector has seen some interesting deals with new entrants such as Fairpoint Group PLC entering the market and making two headline acquisitions. Last year in a £15m purchase of Simpson Millar and this month it acquired volume conveyancing and personal injury practice Colemans CTTS.

The role of technical due diligence in such deals has hit the spotlight. Greater visibility and a deeper understanding of law firms’ financial profile (including WIP profile), value, operational and indemnity risk are fundamental to M&A. The role of technical due diligence has not only needed to keep in step with this change, but also anticipate it. Being able to assist M&A clients in locating ‘diamond’ finds and being able to classify them is of significant value. Risks are inherent in M&A, the key is identifying and understanding those risks. The due diligence role is to prevent ‘invisible risks’ being uncovered after completion.

‘Risks are inherent in M&A, the key is identifying and understanding those risks’ Due diligence drivers Driven by a host of motivators into the sector, and already with their own consumer brands, new entrants’ approaches to due diligence in getting to the deal takes a different perspective from traditional law firm to law firm M&A. An accountancy based due diligence is, of course, at the core of the process, but external investors want to understand more than just the bottom line. EBITDA calculations are not enough. For example, for new entrant ABSs, the issue of brand protection is a key factor. Due diligence has to be financial and commercial, but also has to look at a more granular level than accounting figures. Getting under the skin of the firm is critical in the process. The investment board in such deals require reassurance that the target law firm’s asset base is investable/suitable for funding, that positioning in the market and strategic future is significantly attractive, that technical expertise fits their own brand quality, and that operational risk is low. Added to this, their knowledge at ground level about the legal sector may be limited to locating potential deals. The

next stage on is to get a much deeper view on the target’s sector area. For example, if this is a niche area of injury, the investor/investment board will want a much more detailed understanding of that niche area. This forms part of the due diligence process.

‘Due diligence has to be financial and commercial, but also has to look at a more granular level than accounting figures’ The positioning of specialist technical due diligence Specialist WIP due diligence is a critical part of many M&A deals. Sitting alongside the accountant’s role, due diligence is carried out by technical auditors; i.e. lawyers, costs experts, and risk auditors that are trained in WIP due diligence. Technical due diligence assesses the value and risk profile of a target firm’s WIP. Assessment of technical competence, operational risk and opportunity value forms part of the process. It is these factors, which can have a significant impact on WIP value and can potentially undermine brand protection. Whilst a traditional accounting approach will look at historical recovery rates, assessing the current WIP book at technical level, adds value to the process. Sampling the WIP Due diligence surrounding the WIP will take the form of sample auditing. This may follow a two staged process to enable identification of early deal breaking issues, before significant investment in the due diligence process. Highrisk areas will be assessed and sampled first. If this is a multi-service law firm, injury litigation, commercial property and commercial litigation are example high-risk areas. Sample size and selection criteria are critical. Transparent methodology is fundamental to scoping the due diligence. Technical capability and operational risk The target firm’s technical skill and expertise can have a significant impact on professional indemnity risk. With new entrants concerned about brand protection, due diligence around these issues are important. Further, a review of client care and the consumer journey are also key factors. What does the future hold? It is clear that there is more M&A and search for ‘diamonds’ to come. There is continual fluidity and the landscape will no doubt significantly evolve further over the coming months. Expect the unexpected. Zoe Holland is Founder and Managing Director of ZebraLC.

MC // Septemeber 2015

The Features

Foreign law and claims abroad Mark Lee, a leader in the field of travel law and a partner at Penningtons Manches, identifies the key issues to consider when handling a foreign accident claim.

ince the implementation of the Jackson reforms and fixed costs, traditional personal injury firms have reassessed their offering and structure in an effort to remain profitable. This exercise has resulted in some practitioners retraining and expanding into areas of niche personal injury work that are not, at least for now, constrained by fixed costs. This has inevitably resulted in a surge of new entrants into the travel litigation market, with travel law seen as one of the last bastions of the pre Jackson arena, at least from a costs perspective. Whilst proportionality and costs budgeting apply to English litigated travel cases, the spectre of fixed costs is not currently on the agenda. It now seems inevitable that fixed fees will be introduced for clinical negligence claims and this trend is therefore likely to increase as other practices look to diversify. Whilst one can understand the strategy behind this transition, law firms would be well advised to consider the numerous potential pitfalls associated with this area of work. This article is intended to give an overview of some of the most commonly encountered challenges that need to be borne in mind. Foreign lawyers In order to competently handle personal injury claims derived from accidents abroad, one should firstly have in place a truly international network of tried and trusted personal injury lawyers. The English practitioner must rely upon their expert counsel to successfully steer claims pursued abroad and also for expert evidence on foreign law if the claim is litigated in the UK. Personal injury claims are usually much less prevalent in foreign jurisdictions and consequently suitably qualified and experienced personal injury lawyers can be thin on the ground. The best ones will have local knowledge of the defendant’s insurers and the local court. They will also be

‘A local agent who does not have an appropriate level of experience will inevitably be exposed as the litigation process continues’ MC // Septemeber 2015

accustomed to working against fixed reserves to enable their instructing solicitor to manage costs and to comply with legal expenses insurers’ reporting requirements. Applicable law For claims that are pursued abroad, foreign law will apply to all issues associated with the case, to include liability, quantum, limitation and costs recovery. Aside from this, there are also important cultural differences to be considered, and advice from the local agent can be invaluable in that regard. The question of applicable law is less clear-cut for foreign accident cases litigated in the English Courts. European law allows an English Claimant involved in an RTA to initiate a claim against the defendant’s foreign insurer in the UK (provided the country of origin permits a direct right of action). This is often advantageous since the case proceeds through the English courts, and reasonable costs should be recovered if the claim is successful. However, in that scenario, the English Judge must ordinarily assess liability and quantum with reference to the law of the country where the accident occurred. This again reinforces the importance of credible, and experienced local lawyers, who can assist in an advisory capacity and also prepare formal reports for the courts and attend trial to give evidence. A local agent who does not have an appropriate level of experience will inevitably be exposed as the litigation process continues. Whilst foreign law applies to these cases, the quantification of any asociated care claim can arguably be determined in line with the actual cost as incurred in the UK. Whilst this remains a grey area, it can have a very significant impact on the level of damages ultimately recovered. It should also be noted that gratuitous case is often not recognised as a head of loss in foreign jurisdictions. It should also be noted that liability and quantum will be determined by English law if the claim lies against a driver who is habitually domiciled in the UK. A typical example might be the English passenger who decides to sue the English driver of the vehicle in which he was travelling when the accident occurred. However, even in that scenario, it is the foreign limitation period that will ordinarily apply. An injured Claimant might also wish to bring a claim in the UK against his or her tour operator pursuant to the Package Travel Regulations. These claims are based on a breach of contract and subject to English law. It is almost always necessary to obtain evidence from a foreign expert regarding the local standards and regulations that apply in the foreign jurisdiction, despite the application of English law, since it is those standards that the Judge must consider when determining the issue of liability. Jurisdiction It is also very important to consider the question of

The Features

‘It is almost always necessary to obtain evidence from a foreign expert regarding the local standards and regulations that apply in the foreign jurisdiction, despite the application of English law’ jurisdiction and to evaluate the options before deciding where to pursue the claim. One should not assume that it is necessarily best to issue the claim in the UK. It may instead be in the Claimant’s best interests to pursue the claim abroad, where the accident happened, or against a Defendant that is domiciled in a different jurisdiction. This therefore requires careful consideration. For example, this is true of fatalities in Greece and Spain. It will usually be the case that the family and dependents of the deceased will recover more in damages in either of those jurisdictions than in the UK. In Greece, for example, many more relatives can claim for damages, unlike the UK where the Claimants are restricted to dependants only. Indemnity caps For high value cases, it is important to clarify, where possible, the level of any indemnity cap that may be contained in a foreign insurers’ liability policy. This needs to be considered to properly assess the overall strategy of the case. Since 1st June 2012, EC law has imposed a statutory minimum level of insurance cover of 5 million euros (the minimum level of indemnity was previously fixed at 2.5 million euros from 1st December 2009 and, before then, at 1.8 million euros).

‘For high value cases, it is important to clarify, where possible, the level of any indemnity cap that may be contained in a foreign insurers’ liability policy’ Limitation Last, but by no means least, there is the minefield that is limitation. In our experience, it is this area more than any other which exposes the unwary to difficulties. Whilst the European Commission has recognised that EC citizens are likely prejudiced by the range and variety of limitation periods in the European Union, these have yet to be harmonised. As a consequence, there remains a very diverse range of limitation periods that apply across member states, ranging from a year in Spain to ten years in France. The Montreal and Athens conventions (which govern accidents on planes and accidents on cruise ships) apply a statutory limitation period of two years from the date of the accident, compared with the usual three year limitation period for PI claims in the English jurisdiction. This two year limit cannot be extended. The approach adopted in the USA perhaps illustrates

best how complex the question of limitation can be. The first key point is that the statute of limitation for injury claims varies from state to state. Depending where the injury occurs, a claim may be governed by a statute that ranges anywhere from three months to four years. It is therefore critical to identify early on the statute for the state where the accident occurred, which is usually the appropriate forum for any proceedings. In New York, any claims against the municipality (such as slip and trip claims on raised pavements) are subject to a strict three month time limit within which the complaint must be reported officially to the municipality. If this is not done, any possible compensation claim becomes statute barred. Law firms handling claims in the US must therefore have an expansive network of personal injury attorneys across the country, to identify the relevant limitation period at the outset and to then advise on the law applicable in that state. Even within the same state, there may be different time limits for different claims. For example there is a one year time limit for medical negligence claims in Florida, but a four year time limit for other personal injury claims. A few additional peculiarities, which may add further complications across a range of jurisdictions, are listed below: 1. Unlike the UK, the fact that a claim is being brought by a minor is irrelevant in many jurisdictions. The same limitation dates instead apply for minors and adults. 2. It is not always easy to clarify when the limitation date begins to run. In Spain, for example, the one year period does not commence until criminal proceedings have concluded or the injuries have “consolidated” (and the question of consolidation can be a tricky one!). 3. Extending limitation dates can be simpler than in the UK. In some jurisdictions, a telegram to the third party insurers detailing the claim is sufficient (e.g. Spain). 4. There may be different limitation dates against different defendants within the same country (e.g. Greece where there is a direct right of action against the third party insurer – two years – but five years against the negligent individual). 5. It must not be assumed that simply issuing proceedings will interrupt the limitation period (as it would in the UK). In Greece, for example, formal proceedings must not only be issued, but also served against the defendant. In summary, the issue of limitation is fraught with potential difficulties and it is very important to establish the correct date(s) and the relevant defendants at the outset of any claim. Mark Lee is a Partner at Penningtons Manches. Mark.Lee@Penningtons.co.uk

MC // Septemeber 2015

The Features

Building the world-class claims function Claims is firmly back on the strategic agenda for the specialty insurance market. In the current climate, with clients constantly pushing for increased value at the same time as the market is beset by regulatory and cost pressures, ‘more for less’ has become a strategic imperative for many market participants. Ian Summers reports.

chieving this goal inevitably means a rethink of old ways of working, investment in new technology and a clear vision from leadership as to how the claims function can best add value. Against this backdrop, it seems appropriate that we take a look at the strategic claims function and introduce Sequel’s bespoke “Claims Value Pyramid”, our practical tool for claims leaders looking to take their department to the next level.

Having the right systems is obviously important, especially for workflow and so on, but the feedback we get from clients is that, even with the right fit in terms of technology partner and development, insurers will still struggle unless they have the right people with the right skills to operate and make best use of them. Training and development, and investment in skilled handlers, is therefore a vital element of a world-class specialty claims department.

‘One of the most significant changes in recent years has been the shift in claims from being something of a back-office function to a more integrated function that works alongside the underwriters’ Indeed, claims is moving out of the shadows to take its place at the heart of the speciality insurer’s business. One of the most significant changes in recent years has been the shift in claims from being something of a back-office function to a more integrated function that works alongside the underwriters. The claims process has a fundamental role to play here, as it gives firms the chance to actually touch the client directly. Clearly, this higher profile role for claims puts even more pressure on the need to deliver a positive experience in order to build customer and broker relationships that will last.

MC // Septemeber 2015

Valuing the customer experience One of the main factors now is clearly going to be the quality of your claims handlers. Good claims handlers are taking a much more data driven problem-solving based approach and are focusing on customer experience as well claims management. Holding onto claims doesn’t save the company money either: in many instances, it makes more sense to pay it and get rid of it, thus reducing leakage – to get the balance right a clear oversight of claims metrics is key. Price remains key – and will always do so – but there is no escaping the fact that, in the specialty insurance world, relationships are a strong driver for business. Speciality insurance remains a people business, augmented and supported by technology and processes – but the relationship piece remains key. Globalisation is impacting the insurance world every day. The world is an ever more complex place in which to place insurance. Customers are therefore looking for firms that can provide them with specialist expertise and advice across many different product lines and territories. Our next big challenge as an industry is getting better at understanding and using our data. The term Big Data has been common in the industry for a few years now, and indeed, we do have lots of data now – but how can insurers use it? The market knows that data is important, but how you mine it, deploy it and express it is just as vital as the underlying quality of the data, especially when it comes to pricing risks and products accurately. Modernisation in the market Looking at the London Market in particular, ECF (Electronic Claims File) has obviously been a key improvement over the paper claims file. Combining ECF with new procedures reduces the number of agreement parties, speeds up the agreement of claims, and provides an opportunity to see who is leading claims by putting a spotlight on the individuals doing the work. Also, because ECF provides much greater transparency, it enables brokers to see exactly what has gone on with a claim at any time, almost 24/7. As a result, the average transaction time came down from 33 to 11 days. With the introduction of the latest technology improvements (ECF write back), the 11 days will reduce further and provide claims practitioners with the ability to manage claims and have access to data within their own environment, rather than needing to “logon” to a secondary system. It’s important to make the claims process as efficient as possible but at the same time, it benefits all Market participants to maintain the high quality that the London Market is known for. Technology is an enabler for London to capitalise on its knowledge and experience,

The Features

‘The market knows that data is important, but how you mine it, deploy it and express it is just as vital as the underlying quality of the data, especially when it comes to pricing risks and products accurately’

Indeed, the modernisation we’ve seen in the London Market over the past decade has been impressive, especially when you consider the volumes of paper-based transactions that have been taken out as a result. Overall, the market has really made a concerted effort to improve procedures and speed things up using technology. It seems clear that we can expect that claims will continue to modernise, especially as there is now an appetite for more efficient technology systems and processes. The Market is experiencing the benefits of new processes and systems, which means that things like multiple agreement parties and hand-offs will be reduced. In this respect, the London Market is definitely heading down the right road. A world-class claims function The ideal specialty claims function would include people and systems that are not only customer friendly, but customerfocused as well. This strong customer focus, combined with streamlined processes and good communication – both internally and externally – is an essential part of a world-class claims experience. The perfect claims management system should get as close to a one-touch claims process as possible, with a streamlined model that is based on a single client record, rather than relying on multiple spreadsheets. It obviously makes no sense to repeat the same task in different places and on different systems, so a winning claims function needs to address any unnecessary duplication of effort.

excellent and continually improving is no easy task – but it is achievable with the right people, using modern technology in the most effective way, and working to a clear vision which is shared by all, from the C-suite down to the front-line claims handler. This is the journey to take for those claims leaders seeking to create a world-class claims function. We believe that there are five key steps when it comes to getting speciality claims right. 1. Firms need to have a reliable and efficient claims system that can handle claims seamlessly, with the fewest possible touch-points and hand-offs. Whilst product design is still important, firms must be able to handle a claim quickly and transparently, and without any problems, from start to finish. 2. The claims experience is incredibly important to customer satisfaction and retention. Customers obviously want to secure a competitive premium, but they also want a policy and a provider that they can trust. Some insurance products are now seen as a commodity, and so price will remain a key factor in those cases, but others will have a much greater service component

Ian Summers is Business Development Director at Sequel. www.sequel.com

SEQUEL CLAIMS FUNCTION VALUE PYRAMID

• • • •

Building a strong claims culture which is challenging, collaborative, technically

‘Claims will continue to be ‘the shop window’ for the insurance industry – but what’s in the window may vary’

that firms need to get right. 3. A claims operating model which frees an experienced claims expert to manage those claims which require attention, working closely with customers to pay claims promptly, while protecting the insurer, is vital to building a sustainable claims service. 4. Technology has a vital role to play in supporting further improvements for the industry – especially when it comes to streamlining key processes. The next big challenge is collecting, understanding and using customer data to make the best and most accurate decisions when it comes to policies, pricing and claims. 5. Claims will continue to be ‘the shop window’ for the insurance industry – but what’s in the window may vary. The customer experience is ultimately what matters most, with customers increasingly demanding much greater transparency, control and flexibility. As a result, these processes and technologies must continue to improve, so that the journey from customer to intermediary to insurer can become much more personalised, faster and efficient.

• • •

• •

• • •

• • • • • •

Lean Strategic function World-class people Modern technology Leadership Claims is at the heart of the business

VALUE INCREASING

deployed to make Market processes more streamlined and transparent, with fewer agreement parties.

Good people Mostly modern technology Coherent vision Some manual processing “Get the job done” Blend of technology systems Knowledge held by a few senior people Culture of cost-cutting Performance hard to measure

Manual processes Disparate legacy technology Compliance challenges

• • •

Retention issues Demotivated team Low value, lacking leadership

MC // Septemeber 2015

FOR ANYONE INVOLVED IN PROPERTY CLAIMS 25-26 NOVEMBER 2015

THE BDMA CONFERENCE 2015 BRINGING TOGETHER SPEAKERS, DELEGATES AND EXHIBITORS ACROSS THE WIDER INSURANCE INDUSTRY AND RELATED SECTORS TO ADDRESS PRACTICAL, TECHNICAL AND STRATEGIC ASPECTS OF PROPERTY CLAIMS

Chaired by ANT GOULD, CII Director of Faculties, with speakers from THE CABINET OFFICE ENVIRONMENT AGENCY ASSOCIATION OF BRITISH INSURERS, CHARTERED INSTITUTE OF LOSS ADJUSTERS CHARTERED INSURANCE INSTITUTE NATIONAL FLOOD FORUM LANCASTER UNIVERSITY BRITISH STANDARDS INSTITUTION and THE BDMA Workshops & seminars include case studies on the SOMERSET LEVELS and the GLASGOW SCHOOL OF ART FIRE KEYNOTE SPEAKER: ANNE McINTOSH, Chair of the Commons EFRA Committee 2010-2015 VISIT SUPPORTED BY

www.bdma.org.uk/conference2015 or

CALL

01858 414278 MEDIA PARTNER

The Features

Opportunity with a shared vision Charlotte Parkinson, Modern Claims, spoke to Peter Watson, Managing Partner of Simpson Millar LLP, and Janet Tilley, Managing Partner of Colemans-ctts, following the recent merger between the two firms, to find out more about their motivation for combining their businesses and how the new partnership will work in practice. Q: What led you to consider a merger for your businesses? A: PW: Following the acquisition by Fairpoint of Simpson Millar in July 2014 we made no secret of the fact that we had an aim to grow Simpson Millar to a revenue target of £60m by June 2017. This would place us in the top 50 UK Law Firms and the handful of firms dealing with Consumer Legal Services. JT: Post LASPO, Colemans-ctts took the bold step of developing an efficient market leading volume legal claims operation. Based on a quality proposition, we have trebled our annual new business in the PI and Conveyancing sectors. Having built the platform, we saw the benefit of joining a business focused on achieving growth in Consumer legal services. Q: What did both firms see as the key benefits of merging and why? A: PW: The Management teams at Simpson Millar and Colemans have known each other for a number of years and so had the very substantial benefit of knowing there was a good culture fit throughout the two firms. We also had a shared view of where we wanted to take our respective firms. JT: We felt that by bringing the two firms together under the umbrella of the Fairpoint Group, we would be able to align our volume capability with Simpson Millar’s legal expertise in more complex PI areas and wider portfolio of Consumer Services. Q: What were the specific challenges associated prior to the merger and why? A: JT: Where both firms are of a similar size, it is challenging to blend the financial and operational metrics in a way that allows both firms to continue to flourish as one. The key has been detailed forward planning. The early development of a combined financial

business plan, a robust structure and well defined projects for integration have proved key to ensure the transition runs smoothly. PW: Bringing two large firms of broadly the same size together is a much more complex proposition than is the case when the firm being acquired is much smaller than the acquirer. Integration issues require much more planning and Partner and Staff roles have to be carefully thought through. Q: How did Simpson Millar and Colemans work to overcome these challenges? A: JT: The detailed collaboration and planning provided a strong platform for us all to move forward with regular meetings to monitor and progress actions. With the support of a Group experienced in change management, we were able to hit the ground running. Q: Do the factors to consider prior to and following a merger differ for the acquiring party and the party being acquired? A: PW: The strategic reasons for merging, together with the culture and ambition should be aligned and if they are not then you shouldn’t proceed. Q: How will the integration process work post-merger for both firms in practical terms?

‘Where both firms are of a similar size, it is challenging to blend the financial and operational metrics in a way that allows both firms to continue to flourish as one’ Janet Tilley

A: PW: Full staff consultations took place between exchange and completion and a detailed organisation design exercise was carried out. Roger Coleman the Senior Partner at Colemans has taken up the role of Integrations Director responsible for driving through the integration of the two firms and also integrations activity as between the enlarged Simpson Millar and the Fairpoint Group. JT: I have also now transitioned from the role of Managing Partner to Director of volume legal services, responsible for the continued success of the Legal Processing Centre.

‘Bringing two large firms of broadly the same size together is a much more complex proposition than is the case when the firm being acquired is much smaller than the acquirer’ Peter Watson Q: What next for Simpson Millar/ Colemans now the merger is complete? A: JT: The former Colemans Partners are looking forward to playing a part in achieving the growth targets of the business aiming to become a top 50 UK Law Firm with a revenue target of £60m. We believe our volume processing platform is well placed to not only achieve growth within our traditional PI and conveyancing markets but to support the company mission of “making law more accessible” through transparent pricing and fixed fee products offered throughout the consumer legal life cycle. PW: Work is continuing on our growth strategy. However, we need to prioritise the proper integration of Simpson Millar and Colemans and we will not simply acquire further firms just for the sake of ‘bulking up’. There needs to be a sound strategic reason for any acquisition we consider by reference to the target operating model we are working towards.

MC // Septemeber 2015

The Features

Stronger Together

ach time there is a major incident affecting high volumes of property it is evident that lessons learned from previous events have resulted in an improved response. With all sectors working together to develop enhanced planning, response, and prevention strategies, the impact of future incidents will continue to be better managed and contained. The Winter Storms of 2013-2014 for example, not only benefited from the advances in collaborative working implemented in recent years; they also brought about greater engagement of government and communities intent on establishing improved protocols for the future. The many areas in which the wider industry and other stakeholders are identifying best practice, based on collaboration and joint working, will be a focus of the BDMA Conference, which will give delegates an insight into how the insurance industry, its partners, communities and the government see the future management of incidents associated with property claims. Damage Management in practice With the key sessions on the latest strategic thinking scheduled for Day Two of the conference, the emphasis on Day One will be on the practical and technical aspects of property recovery and restoration. It will include workshops and seminars on subjects such as property drying options, restoring fire and smoke damaged buildings and contents, measuring moisture in concrete and properties of building materials. There will also be plenary sessions on the specific knowledge and expertise associated with commercial restoration, the relevance of industry standards and detailed case studies on the Somerset Levels and the Glasgow School of Arts Fire. Strategies for the Future Keynote speaker, Anne McIntosh,

who was recently awarded a peerage following the dissolution of the last parliament, was Chair of the Environment, Food & Rural Affairs (EFRA) Commons Select Committee 2010-2015, during which time she oversaw the inquiry into Future Flood and Water Management Legislation. Her first hand knowledge of the effects of wide area flooding on families, households and the farming community, as MP for the Vale of York during the 2007 floods, combined with her understanding of how the government is scrutinised and held to account, will set the scene for the following strategic issues under discussion on Day Two.

‘Delegates from all industry sectors will gain an insight into many different aspects of our industry and how working together will strengthen our efforts to provide the best outcomes for our customers’ Organisational Resilience can change the way we prepare for and respond to emergencies. Dr Robert MacFarlane, Assistant Director of UK Resilience Training and Doctrine at the Cabinet Office, will consider the importance of top-to-bottom and sideto-side coherence in organisations, networks and other collectives across sectors and disciplines. Flood Mitigation Strategy is at the centre of the country’s efforts to be prepared for the worst excesses of our changing climate. The Environment Agency’s Jonathan Day will discuss the Agency’s work on evaluating risk, providing warnings and predictions of impending events, investing in flood prevention and working in partnership with other stakeholders. He will also include some observations on the recovery and response from insurers and their supply chains. A unique collaboration between Lancaster University researchers and the Save The Children charity is looking

at children’s experiences of flooding, how they can be supported and how to enhance their resilience and longer term recovery. The ‘Children, Young People and Flooding’ project team will report on their findings to date, which include some powerful messages they hope will influence both industry and government policy. Co-ordination of Flood Response is the subject of another recent project. This study, by the CII’s New Generation Group, analysed the interactions between stakeholders following flooding and the team will highlight their recommendations and the importance of working together to deliver better customer outcomes. A new British Standard for Damage Management (BS12999), which has been developed with the support of key stakeholders across the wider industry, covers the organisation and management of stabilisation, mitigation and restoration of properties, contents, facilities and assets following incident damage. The British Standards Institution (BSI), together with the BDMA, will talk about the standard’s development and how this Code of Practice will benefit both the wider industry and the consumer. With Laura Hughes, the ABI’s Policy Advisor on General Insurance, Benedict Burke, President of the CILA, Paul Cobbing, Chief Executive of the National Flood Forum and BDMA Chairman, Steven Richford, providing the latest thinking from the industry’s key stakeholders, delegates from all industry sectors will gain an insight into many different aspects of our industry and how working together will strengthen our efforts to provide the best outcomes for our customers. Claire Johnson is BDMA Press & Marketing Officer. The BDMA Conference 2015 takes place on 25-26 November in Stratford-upon-Avon. Full details, along with links to online booking for delegates, sponsors and exhibitors, are on the conference website at: http://www. bdma.org.uk/conference2015. For more information, Claire can be contacted on 020 8465 5659, 07774 692065 or via c4u@compuserve.com

MC // Septemeber 2015

5 minutes with...

5 minutes with... Tania Sless

Q: Has the industry changed drastically since you started working in it? A: There have been very major changes in the personal injury arena since I came to England in 1988. Back then injury claims were almost all funded by legal aid or by trade unions. Other than trade union member claims, most of our opponents were High Street solicitors who handled a wide range of work and did not hold themselves out to be specialist personal injury litigators. Now claimants tend to be represented by lawyers who only handle personal injury work. There has also been a considerable amount of consolidation (on both sides) such that there are fewer claimant and also defendant firms. Q: What has been the key positive or negative impact of change in your area of the market? A: Case management by the courts means that there is generally less delay than was the case in the 1980s. Cases are resolved more swiftly and often before proceedings are issued. Less positive, unfortunately, has been the relegation in some instances of the interests of claimants behind the commercial interests of their lawyers. I am often asked to provide a recommendation to someone who has been injured and wants to bring a claim and it has become an increasing challenge, although I’m pleased to say that there are still some ‘old school’ lawyers around who put their clients first.

Q: Who inspires you and why? A: On an individual level, I am in awe of my partner David Hunt, who has boundless energy and an impressive memory for people and facts of which I am very jealous. More generally I’m inspired by seriously injured claimants who retain a positive outlook on life. Q: Have you had/got a mentor? If so, what was the most valuable piece of advice they gave you? A: Sadly, I pre-date the introduction of mentoring – but over the years I learned a huge amount from Alec Diamond in Dublin, Geoff Meyer in the Prudential legal department and David Rogers at DAC, all of whom were lateral thinkers and problem solvers. Alec told me during what was then called my training to stop thinking about work when I shut the door to the office each day – advice that I wish that I had been able to take! Q: If you were not in your current position, what would you be doing? A: I was very lucky to fall by chance into a really interesting area of law involving people as opposed to property or documents. But if I hadn’t been a lawyer, then I would love to have worked in an art gallery. Tania Sless is a partner specialising in catastrophic injury and product liability claims at international law firm DAC Beachcroft.

Gregory Abrams Davidson chooses Proclaim Eclipse’s Proclaim Practice Management solution selected in 6-figure deal

regory Abrams Davidson is implementing the Proclaim Practice Management Software Solution from Eclipse Legal Systems, the Law Society’s endorsed provider.

Based in Liverpool with offices in London, Gregory Abrams Davidson is an established law firm with a clientbase comprised of corporate, public sector and private clients. The firm prides itself on its philosophy of striving for professional excellence and maintaining its stellar reputation. In a 6-figure deal, the Proclaim Practice Management Software system has been rolled out to 80 staff, across all work areas including Clinical Negligence, Conveyancing, Matrimonial, Probate and Personal Injury. Proclaim provides all fee earners with a centralised and consistent approach to matter management – from inception right through to completion. Risk is effectively managed at both departmental and firm-wide levels, with users benefiting from a host of tools to manage and streamline the client ‘journey’.

MC // Septemeber 2015

Eclipse has also conducted full data migration from the incumbent system, allowing the integrated Proclaim practice accounting and financial management toolset to be implemented, boosting efficiency and providing detailed analysis of the firm’s operations. Gregory Abrams, Senior Partner at Gregory Abrams Davidson, comments: “We pride ourselves on striving for excellence and providing first class service for our clients. In the everchanging legal sector, it is crucial that we implement a software system which will enable us to streamline our process to ensure administrative overheads are removed and our fee earners have more time to spend delivering expert advice to our clients. Proclaim was the clear marketleader for this.” For further information, please contact Darren Gower, Marketing Director at Eclipse Legal Systems, part of Capita plc, via darren.gower@eclipselegal.co.uk or call 01274 704100. Alternatively, visit www.eclipselegal.co.uk

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