Modern Claims Magazine issue 1 by Charlton Grant

Linking the Industry Together

May 2013 | Issue 01 | ISSN 2051-6495 Steve White new CEO of BIBA outlines his manifesto priorities for members and underlines his commitment to fighting for fairer, more relevant regulation for insurance brokers. Motor sense: Instead of moaning about the state of the insurance market, a team of claims professionals decided to try and do something about it, as Ant Gould, CII, explains.

Modern Claims Magazine | May 2013 | Issue 01

“Claimant representatives and insurers are always going to be on opposite sides of the fence. But we can agree to disagree on some issues and put that aside and work together on issues of mutual interest, fraud, for example.” James Dalton, ABI

Dominic Clayden “I don’t believe having lawyers in those low value claims adds any real material value – the value can be delivered by going directly to the insurer so from an Aviva point of view, let the insurer have the first go at settling it.”

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Introduction

Welcome

to the first issue of

n the spirit of change for the claims sector, we are delighted to bring you Modern Claims magazine – a unique new publication created by all spheres of the industry, for the industry. Modern Claims features exclusive opinion, indepth interviews and analysis from claimant and defendant lawyers to insurance companies and brokers, expert witnesses, funders, rehabilitation specialists and the creators of effective claims processes. It endeavours to expose the realities of effective claims processing in light of reform and regulation; what the industry / customers / clients and partnerships might be missing or indeed getting right and sharing those stories with the wider sector. I’m delighted to welcome you to the first issue – packed with new faces and recognisable VIPs who make up our editorial board and author our features. We have been lucky enough to secure exclusive interviews with the ABI, Aviva, the BIBA and the former MASS Chairman and partner of Carpenters for the launch edition – and there’s more to come. So read on and stay in touch – this is your platform for knowledge and analysis exchange. Come, join in the debate and share your understanding of where the claims market is heading, what clients need and how to service expectations under the new legal and regulatory regimes. As well as the bi-monthly publication we have also launched a new website (www.modernclaimsmagazine.co.uk), to be followed by specialist roundtables made up of industry figureheads as well as regular supplements. At a time when the claims industry is currently facing its biggest fear – the unknown - make sure you stay in the know and have Modern Claims and its experts to hand.

Modern Claims - helping to inform, arm and innovate the industry in a new era... Emma Waddingham, Chief Editor Email me @: emma.waddingham@charltongrant.co.uk

Modern Claims Magazine

Issue 1 – May 2013 | ISSN 2051-6495

Project Director Kate McKittrick

Chief Editor Emma Waddingham

Head of Events Julia Todd

Events Manager Charlotte Parkinson

Production Lindsey Thomson-Heley

Accounts Director Karl Mason

Editorial Department Charlotte Parkinson

Interview Editor Bippon Vinayak

Advertising Rachael Pearson

Design Richard Berry

Contact t: 01765 600909 e: info@modernclaimsmagazine.co.uk w: www.modernclaimsmagazine.co.uk

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 // May 2013

Contents

CONTENTS 03-08 Intro & THE News 07 Ant talks news

Instead of complaining about the state of the insurance market, claims professionals have been trying to do something about it, to put the sense back into motor, as Ant Gould explains

11-17 The INTERVIEWS 11 Interview with... Steve White, BIBA

Steve White tells Emma Waddingham about BIBA’s rejuvenated focus through its mandate to help grow the sector and fight for fairer regulation.

15 Interview with... James Dalton, ABI

Emma Waddingham speaks to the ABI’s Assistant Director, Head of Motor and Liability, about the impact of reform and the need to step up the fight against fraud

19-40 The Opinions 20 New horizons

21 It’s all up in the air

Rod Evans, Forum of Insurance Lawyers

23 Cowboys and Indians

Alan Nesbit, Association of Regulated Claims Management Companies

24 Collaborative marketing

Matthew Waterfield, Simply Lawyers

24 With a push of a button

Robert Kelly, Acorn Assessors

Jim Toole, First Response Law

25 The balance of rights

Peter Parry, Independent Accident Investigations

27 Further intervention

Peter Horton, LV=

27 The balancing act

Donna Scully, Carpenters

28 Money to be made?

Alan Nesbit, Nesbit Law Group

20 Whiplash: where are we now?

Rob Smale, Ageas

Craig Budsworth, MASS

21 Improving support for Mesothelioma suffers

25 CMCs: Going back to their roots

BIBA

28 Take control of change

29 Do you know what diminution is?

Emma Bell, Clifford James

ABI

Editorial Columnists Alan Nesbit Craig Budsworth Managing Partner Chair, MASS & Nesbit Law Group & Chairman, ARC RTA Partner, Glaysiers

Jim Toole Operations Director First Response Law

Nik Ellis Managing Director Laird Assessors

Rob Smale Claims Director Ageas

Alan Strange Underwriting Director LAMP Group Limited

Darren Gower Head of Marketing Eclipse Legal Services

Keith Crosier Managing Engineer Legal & Technical Assessors

Peter Horton Chief Operating Officer - GI LV=

Rod Evans President FOIL

Andy Kirk Director Quartix

David Brierley Business Development Executive Willis UK Retail

Laurence Waterhouse Associate Director REC Flood Risk

Stuart Brown QC Parklane Plowden

Andy Whatmough Director S & G Response

David Williams Managing Director, Underwriting AXA Insurance

Mark Savill Managing Director Lyons Davidson

Peter Parry Managing Director Independent Accident Investigations

Ant Gould Director of Faculties Chartered Insurance Institute

Donna Scully Partner Carpenters

Matthew Waterfield Head of Legal Development Simply Lawyers

Anthony Hughes Chief Executive Horwich Farrelly Solicitors

Emma Bell Director Clifford James

Michael Davidson Head of Strategy & Sales Goldsmith Williams Solicitors

Bippon Vinayak Chairman & CEO Doctors Chambers

Gary Pomfret Casualty Practice Leader UK, Ireland & Asia Regions XL Group

Michael Nixon CEO Inter-est Ltd

MC // May 2013

Raymond Southern Joint Head of Fraud Berrymans Lace Mawer Richard Clark Director Xuber Richard Forth Managing Director Forths Forensic Accountants Robert Kelly Key Account Manager Acorn Assessors

Tim Wallis Mediator, Solicitor, Director Expedite Resolution Tony Rand Managing Director Kingsley Law Ltd Tony Walton Managing Director Questus

Contents

29 Shades of grey

Raymond Southern, Berrymans Lace Mawer LLP

48 Reconsidering the Approach: catastrophic injury claims

Stuart Brown QC reminds practitioners to look at how the finances should be used and/or invested in outside the box, to ensure long-term and real benefit for the injured party

31 An intelligence choice

Nik Ellis, Laird Assessors

31 The balance of rights

Alan Strange, Lamp Group Limited

33 Outsourcing: the future?

Michael Davidson, Goldsmith Williams

50 Interview with...Donna Scully, Carpenters

Donna Scully, Partner at Carpenters and immediate-past Chairman of the Motor Accident Solicitors Society MASS speaks out about the issues facing the PI claims sector – from business planning to further reform in the post LASPO landscape

33 Diverse expertise: the expert

conundrum

Keith Crosier, Legal & Technical Assessors

34 A new era for motorists?

David Williams, AXA Insurance

34 The wait is over...well, almost

53 Telematic-based opportunities

Richard Clark, Xuber

Andy Whatmough, S & G Response

36 The time is now for mediation

Tim Wallis, Expedite Resolution

36 Getting it right for claimants

Richard Forth, Forths Forensic Accountants

37 Consistency is Key

Mark Savill, Lyons Davidson

39 Change beyond expectation

Michael Nixon, Inter-est Ltd

Tony Rand, Kingsley Law Ltd

40 Complicating revolution

Anthony Hughes, Horwich Farrelly Bippon Vinayak, Doctors Chambers

41-62 The Features

Will we really miss days gone by for legal services and will the clients? Tony Walton visualises a worryingly possible scenario – which you’ll either love or hate...

45 Good relations?

LASPO & the Jackson reforms, ABSs and joint ventures between insurance companies and lawyers, have led to a more unique relationship between claimant and defendant legal practitioners, as Anthony Hughes reports

Dominic Clayden, Aviva’s Director of Claims, speaks to Bippon Vinayak about controlling costs, fraud, settling fairly and quickly for clients and the effective use of medical reporting agencies.

Laurence Waterhouse asks, is the risk from climate change increasing for insurers, developers and property owners?

61 Taking stock: APIL Annual

43 We’ll miss the good old days

Dominic Clayden, Aviva

59 A flood of concern

40 Evolving for efficiency

The last 12 months have certainly been history in the making for the professional services sector with the advent of ABS. With legal and RDR being the key focus for most of the financial sector, it has been a challenging but interesting time for all professional service stakeholders concerned. Michael Davidson reports.

56 Interview with...

39 Beyond LASPO and AHSE 6115

55 An affinity for quality partnerships

35 Wider choice for consumers?

Telematics technology is fast-becoming mainstream with motorists as insurers recognise the advantages of telematicsbased insurance, as Andy Kirk explains

Gary Pomfret, XL Group

35 Legacy systems and risk

Conference 2013

At a time of fundamental unrest within the claims sector, how will the new President of APIL, Matthew Stockwell, manage to take stock of the industry to face the changes head on? Charlotte Parkinson reports.

62 5 minutes with...

Ashton West, Chief Executive of the Motor Insurance Bureau MIB

62 Welcome to the self-service

future of law

Darren Gower, Eclipse Legal Services

61 MC // May 2013

ACORN ASSESSORS CONSULTING AUTOMOBILE ENGINEERS

Ant Gould talks news

Putting the sense back into motor Instead of moaning about the state of the insurance market, a team of claims professionals decided to try and do something about it, as Ant Gould explains.

his time last year, eight young insurance claims professionals were tasked by the Chartered Insurance Institute with the challenge of making a difference to their own profession and ultimately to customers. A very broad brief indeed, but perhaps in recognition of the mood at the time they quickly settled on the issue of motor claims as an area ripe for improvement.

The group’s project idea came from within their own ranks and echoes much of the rhetoric in the market. Indeed, Axa’s UK CEO Paul Evans, speaking at a conference last year made a passionate plea to his fellow insurers, to stop trying to shaft each other over issues such as referral fees and credit hire. And it is not only those within the insurance market that see the motor sector as one due for a little help. In the autumn, the Office of Fair Trading took the much mooted step of referring the UK’s private motor insurance market to the Competition Commission for further investigation amid concerns that the market is not working well for motorists. It had mooted the move back in May after undertaking a market study which it said provided reasonable grounds for suspecting that the market displays features that “prevent, restrict or distort competition”. The core statement that has generated many column inches is that it viewed the market as “dysfunctional” and claimed that insurers are too distracted with lowering costs and pushing up rivals’ premiums to provide policyholders with quality replacement vehicle services. The Competition Commission is expected to cost £3m to run, take two years to complete and take up a lot of time and energy across the profession. Should the watchdog find that the market is harming competition it also has the powers to impose remedies. The market study provisionally found that the insurers of drivers responsible for an accident appear to have little

Members of the CII Claims Faculty New Generation Group 2011-2012 who produced the report above Gemma Glasspool Cert CII, Zurich Claire Holland ACII, Ecclesiastical Edward Frost, Axa Insurance Richard Codd - Crawford & Co Catherine Spencer, Allianz Lee Watts ACII, QBE Laura Terry ACII, Brit Stuart Floyd Cert CII, Direct Line Gropu New Generation Claims Group members 2012-2013 Graham Stait. ACII, Allianz Jenny Neale ACII, Ecclesiastical David Clements Dip CII, Zurich Nigel Fryer ACII, NFU Mutual Martin Kilshaw,Cert CII, Axa Helen Taylor ACII, RSA William Talbot Dip CII, Crawford Ryan Spies Dip CII, Direct Line Neiha Chohan Dip CII.Atrium Underwriters control over the way repairs and replacement vehicles are provided to the not-at-fault driver. This might enable the insurers of not-at-fault drivers, and others such as insurance brokers, credit hire organisations and repairers, to engage in practices which appear to result in the cost of replacement vehicles and vehicle repairs provided to not-at-fault drivers being higher than they might otherwise be. An OFT statement read: “Having considered the responses submitted during a public consultation process, the OFT continues to hold the view that a market investigation reference to the Competition Commission is warranted.” OFT chief executive Clive Maxwell said: “Competition appears not to be working effectively in the private motor insurance market. “The insurers of at-fault drivers appear to have little control over the bills they must pay, and this may be leading to higher costs for them and ultimately higher premiums for motorists. “Having publicly consulted on our provisional decision, we

MC // May 2013

Ant Gould talks news

are still of the view that there is no quick fix to these problems, and that a more in-depth investigation by the Competition Commission is therefore appropriate.” It is against this background that the CII Claims Faculty New Generation Group launched their thought-leadership report which proposes a new way of approaching motor third party damage claims. At the core of the report is a challenge to insurers to sign up to a new process that promises a shift in motor claims best practice. The group’s original investigations found, not surprisingly, that the speed of claims resolution in TPD claims, from a customer perspective, can be overly-lengthy. This was based on the group examining almost 17,000 samples of open stock data which showed a settlement peak of 600-700 days regardless of the value of the claim. Equally, the group claims that the absence of an effective inter-insurer network contributes to huge losses in the industry and that disagreement about liability in motor accident damage settlements is leading to arguably unnecessary litigation in 20 per cent of cases costing in excess of £280m per year, which could be removed if the need for legal support is avoided. To tackle the challenges, the New Generation Claims Group’s mission statement encourages the industry to sign up to a new blueprint for how TPD claims are handled. To create a simpler, fairer and more transparent process, the group is urging insurers to: 1.

Change behaviour in favour of collaboration in achieving a quicker resolution of motor claims. 2. Adopt a protocol that resolves liability disputes and achieves a definitive customer outcome within 72 days 3. Follow a process that offers a realistic chance to resolve a claim at each stage without further delay. That process involves: i. Assessment: insurers reimburse costs where liability is accepted after a maximum of 15 calendar days. ii. Negotiation: where liability remains in dispute, a maximum of 36 days for insurers to prepare a case, exchange documents and reach a conclusion if liability is agreed. iii. Adjudication: if liability is still disputed, the use of “pendulum adjudication” – in which an arbitrator decides which party has the most reasonable position – provides the best option for settlement, with costs shared by each party involved.

The CII New Generation programme The insurance profession, and with any profession, is only as good as the quality of the young talent coming through and it was with this in mind that the CII set up a New Generation programme across its faculties covering claims, underwriting, insurance broking and the London Market. The year long programme takes a handful of insurance practitioners, nominated by their line managers, and brings them together to consider and develop new and innovative ways to improve their sector. In addition to their project work they also provide unique access to Westminster and the FSA. The CII is the world’s leading professional organisation for insurance and financial services. Its more than 108,000 members are committed to maintaining the highest standards of technical competence and ethical conduct. A robust framework of learning and development solutions enables the CII to support corporate partners and individuals across the industry. It ensures that all members comply with minimum standards and inspires many more to achieve advanced levels of technical and professional competence. What do you think next year’s CII Claims Faculty New Generation Group should look at for their project? Email suggestions for their consideration to me at ant.gould@cii.co.uk

MC // May 2013

The NGCG report lays down a need for all participating insurers to believe they each stand to gain equal benefit from the process and adhere to clear and strict mandatory requirements rather than guidelines to create a culture whereby all parties work together to improve the claims experience. While the pre-action protocols set out following Lord Woolf’s 1996 Access to Justice Report were considered effective in helping to each party to understand the other’s position and enabling resolution through Alternative Dispute Resolution ADR rather than resorting to litigation, it was felt they did not go far enough and were not prescriptive enough for non-injury claims. There is hesitancy for motor claims insurers to work co-operatively due to today’s increasingly price-driven marketplace and naturally not wishing to break competition law – even more so now in the light of the decision for the Competition Commission to investigate the private motor insurance market. Yet, perhaps ironically, it is fierce competition that has driven insurers apart and created unnecessary adversarial activity in some cases to customers’ detriment. Co-operation, or collaboration between insurers, in this case is not about collusion but the application of common sense – removing unnecessary attrition for the benefit of customers. The New Generation Claims Group’s work should act as a timely call to action for a part of the market that touches so many people’s lives. The suggested protocol may not be the perfect answer, but the recommendation of a step-by-step change, with improved inter-insurer relationships at the heart of it, is one the industry needs to take seriously – both for its sake and, more importantly, the benefit of customers. Ant Gould is director of faculties at the Chartered Insurance Institute The full report is available at the CII’s website: http://www.cii.co.uk/knowledge/ claims/articles/claims-faculty-newgeneration-group-2012-project/22166

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BIBA

Interview with... Steve White, BIBA Steve White has had little time to recline into his incumbency since becoming the new CEO for BIBA (British Insurance Brokers’ Association). He spoke to Emma Waddingham about BIBA’s rejuvenated focus through its mandate to help grow the sector and fight for fairer regulation in the UK and Europe.

Q A

What is the key focus for BIBA and its members in the modern claims arena?

2013 is an important year for UK growth and our members have a part to play. We have published a new manifesto1 that underlines the key campaign issues for BIBA going forward to help members address what we call the growth challenge. Stand-out campaigns will revolve around the consumer (brokers sell 50% of general insurance in the UK market), to ensure that we are regulated fairly and effectively and to ensure members help customers to manage risk and underinsurance – ensuring business continuity and economic growth. There are also issues of sector continuity for the Broker industry. There are a number of mergers expected or happening as members (insurance brokers are mainly made up of small-medium sized firms) come towards the end of their career and are looking to sell their business on. These are all issues to be raised in the forthcoming BIBA conference2 ‘Meeting the Growth Challenge’ to ensure members have the tools and information to help compete at the same level.

Q A

Why the need for fairer regulation?

Insurers play a significant role directly and indirectly in the UK economy – around 1% UK GDP (which is comparative to agriculture in the UK). Yet this isn’t reflected in terms of how the sector is regulated. We have been shoe-horned into another sector’s regulatory process (the FSA) and the UK insurance brokers’ regulatory costs are the highest in Europe [regulatory costs as a proportion of general insurance intermediation revenue is 3% for the UK broker sector]. It’s not proportionate for such a low-risk sector. Insurance brokers want to be regulated to keep the cowboys out of the industry and protect consumers - and we realise we have to pay for that protection – but the year-on-year rise in regulation cost needs to be tackled. BIBA wants a regulator that is strong while at the same time ensuring an appropriate, proportionate and cost-effective approach to regulation which recognises the low risk – but important – nature of general insurance brokers who do not carry insurance risk. We have a great opportunity for change with the Financial Conduct Authority (FCA) replacing the FSA and our campaigns will ensure the right, not light solution. Martin Wheatley, the new CEO of the FCA will be on stage at the BIBA conference and interviewed by Nick Robinson - proving an opportunity for BIBA members to challenge him on what the regulator will do. 1. See page 20 for details of the latest BIBA Manifesto. 2. The Annual BIBA Conference (15-16 May 2013) will be covered in the next issue of Modern Claims.

Steve White Cert CII, CEO, BIBA Steve has spent over 35 years in the insurance industry, working for the Guardian Royal Exchange Group, the General Insurance Standards Council and the Financial Services Authority. Steve joined BIBA in March 2004, bringing the experience, knowledge and enthusiasm which has significantly benefited both the Association and its members. He has a detailed understanding of the application of FSA rules to insurance intermediaries and is a source of informed opinion on regulatory and compliance issues. He was appointed CEO in May 2013. Steve sits on the Directors’ Committee of BIPAR (the European Federation of Insurance Intermediaries) and also on the Ministry of Justice’s Claims Management Regulatory Consultative Group. In 2010 he was awarded the Compliance Personality of the Year award at the prestigious Complinet Compliance Awards.

MC // May 2013

BIBA

Q A

How will the BIBA operate under your guidance?

We have a mandate aim to create a first class insurance broker sector and the leading UK general insurance trade association for members, customers and insurer clients. This means working more closely with members, to build data and segment membership more appropriately so we can build a better picture of the market and members’ needs. We are going to focus on resonating as one voice, resourcing for the executive team, commercial activities and a new principlesbased code of conduct to help increase customer confidence;

especially in terms of communicating the value brokers bring to customers in the claims stage. Ultimately we get claims paid for customers that might not otherwise be settled – valuable evidence of our commitments and benefit to customers, reflected in our recent member research: Insurance brokers adding value in the claims process (see below for research highlights). With this in mind I’d like to call on members to get involved and add to the debate and call for evidence – especially through the local committees - to help BIBA be the best it can be for its members and the industry. Steve White, BIBA

Modern Claims asked Steve Foulsham, Head of Technical at the BIBA, about the impact of reform and business management change on insurers and insurance brokers in the claims sector.

Do you envisage a number of insurers looking to ABS models (either alone or as a Joint Venture) to overcome the shortfall in claims post-LASPO? Inevitably, some will, as will some brokers.

of clerks who handle it on a call service basis and using a tick box form, gather the information which generates a standard letter. Insurers have reduced and/or deskilled claims departments so it is easier to pass work out to solicitors.

Why haven’t we seen many to date? There could be a number of reasons for this. Some may be taking a ‘wait and see’ view at present, and some solicitors have failed financially, so it may not be so lucrative a business model as perhaps envisaged. It may also not be as flexible as the present system where the most suitable solicitor can be appointed for the case in question. Insurers have made the investment of setting up or taking over firms of solicitors incorporating greatly reduced fees, but arguably, this could reduce the quality as the lowest cost or next in line appointment may not necessarily provide the sufficient expertise required in the particular case. Some would argue that insurers should have sufficient skills in their claims areas to make a solicitor unnecessary other than to fulfil the protected areas and to provide access to a QC (although direct access to barristers is now allowed).

Q A

A Q A

Q A

Is legal services outsourcing a more effective, efficient model for insurers? Yes, at the moment although one could envisage a set up similar to the personal debt firms setting up individual voluntary arrangements (IVAs) where there is one insolvency practitioner and hundreds of staff filling in the forms etc. You could have one qualified solicitor and lots

MC // May 2013

What would insurer ABSs mean for consumer choice? For most consumers, very little. The ABSs formed so far have been mainly for areas such as conveyancing and probate. Insurers would set them up only for litigation work and few consumers get involved in litigation (other than whiplash). Currently, where they do, and it is paid by the insurer, the insurer will nominate which solicitor shall be appointed, so there is not much choice at present. That is not necessarily a bad thing - if the insurer has done its job well, then the solicitor will be experienced in litigation work. If the consumer made the choice, he might choose the firm that did his conveyancing work and who rarely does anything else.

Q A

What would ABSs mean for the insurance broker market? With the demise of referral fees, probably very little. As with insurers, brokers would have to judge how good the insurer plus the ABS is, compared to another insurer plus panel solicitor.

Will reform in Employers Liability (in the Enterprise Bill) have a significant impact to the insurance and insurance brokering market in England and Wales?

Doubtful. At present, breach of statutory duty can give you an automatic right to compensation for the injury suffered. So if you fail to guard a machine and the operator has his fingers chopped off, he does not have to prove negligence to claim damages. It would seem in future given the same scenario; the operator would have to show the lack of guarding was the cause of his injury and the employer owed a duty of care and had failed negligently in not fulfilling that duty. The present basis is that the guarding should be sufficient to prevent the operator getting his fingers trapped, so there could be some cases where the guarding does not achieve this, but in future a court could rule that the guarding was reasonable and the operator had acted unreasonably. This might provide small savings for insurers, but offset by increased legal fees as the claimant has more to prove.

Q A

What is the biggest challenge for BIBA and its members this year in the claims industry? Ensuring prompt and fair settlement of claims.

Q A

What is your key campaign for reform / management etc with regard to the claims insurance market? Our manifesto includes a call to reduce the number and cost of whiplash claims and more appropriate regulation of claims management companies. In addition we would like to see more openness on claims reporting, including publishing of results. Steve Foulsham, BIBA

BIBA

BIBA member research: Insurance brokers adding value in the claims process The BIBA polled members across the UK about claims activity, insurer behaviour and award settlements. It published its findings in January 2013, with the key responses below: • 89% of broker respondents believe that insurers are becoming stricter on paying claims. • 77% believe this is because of the economic climate • 56% said this is because of fraud • Other examples include insurer reduced investment income and claims inflation • 64% of broker respondents have had to fight harder on behalf of clients to get full settlement on claims during the economic crisis. • In the last year 72% said they had overturned a claim rejection by an insurer. • 43% said the average percentage uplift on a claim payment that they regularly negotiate on behalf of a client is between 11-20% • 42% said up to 10% • 8% said between 21% and 30%.

• In the last year 69% of brokers have secured an increased payment for a claim on behalf of a client following an initial lower offer. • 53% said this was occasionally • 16% said that this was often. • For those that secured an increased payment for a claim on behalf of a client following an initial lower offer: • 46% said that the uplift was between 0 – 10% • 26% said between 11-20% • 14% said between 21%-30% • 5% said between 51% and 60% Note: Where percentages total more than 100%, brokers were able to select more than one option in their response. www.biba.org.uk

ABI Interview

Interview with... James Dalton Association of British Insurers

Emma Waddingham speaks to the ABI’s Assistant Director, Head of Motor and Liability, on the impact of reform for its insurer members and the need to step up the fight against fraud, collaboratively.

Q A

Do ABSs and the rise of insurer partnerships or BPOs – especially for non-fault claims increase consumer choice? Do they also mean that insurers are looking to expand into other lines of legal work?

ABSs enable non-legal capital to enter the legal service market through non-traditional legal service providers. A number of insurance firms in the market are considering opportunities to help them manage their claims. Their priority will, I am sure, to be to ensure that customers receive a good service, including access to a choice of legal services. Insurance companies aren’t charities so if the business case stacks up and supports the bottom line, then we may see some such arrangements coming through the system. I think the ban on referral fees is a red herring when thinking about insurers’ possible entrance into the ABS market. And in any event, the Solicitors Regulation Authority which must approve any ABS has been very clear that they will not approve arrangements designed to get around the referral fee ban. The question that needs to be asked is; would the business case stack up for insurers in the context of the recent reductions in RTA fixed fees?. We have long argued that a £1200 fixed fee is too high in the context of referral fees being banned. But with fixed fees at £500, insurers will need to do the sums on whether an ABS model is right for their customers and their bottom line.

Q A

What about the RTA portal – are there any lessons learned from its introduction that can be extended to the forthcoming expansion horizontally and vertically later this year? We got off to a shaky start. Both claimants and defendant solicitors have learned to work within the system. The Board has also addressed some of the

“The insurance sector has made a very public commitment to ensure that any savings will be passed onto consumers. In the last quarter of 2012, car insurance premiums were reduced in anticipation of savings against low-value RTA claims. But this is a highly competitive market”

James Dalton, Assistant Director, Head of Motor and Liability, ABI James is an Assistant Director and Head of Motor and Liability insurance in the General Insurance Directorate. James leads the ABI’s work on improving the personal injury compensation system; tackling uninsured driving; and addressing and improving road safety, especially for young drivers. James also has responsibility at the ABI for the establishment of the Employer’s Liability Tracing Office ELTO and improving the compensation process for those with occupational diseases. Prior to joining the ABI, James was a Senior Adviser at the New Zealand Ministry of Economic Development where he co-ordinated a review of New Zealand’s standards and conformance infrastructure, undertook international trade negotiations and acted as Private Secretary to the New Zealand Minister of Commerce.

MC // May 2013

ABI Interview

“Really, claimant solicitors’ should have been adapting their business models “????” to ensure they can meet the challenges of LASPO...and continue to provide high quality legal advice, rather than engaging in a frantic last minute fee grab” behavioural changes that arose in the early days of managing claims through the portal and it has done a good job in doing so. After the forthcoming expansion both horizontally and vertically, the Board will, I am sure, address any new behaviour issues by solicitors or insurers to ensure the Portal does what it was intended to do. The Government has looked carefully at fixed fees in RTA and ELPL. It decided to extend and reduce fixed fees to avoid any behavioural changes that came into play when the Portal first came into existence – but you can’t tell what lawyers will do until the new system starts but the Portal Board will consider and address any new problems that emerge.

Do you envisage any problems in the claims system due to the sheer scale of claims that have been processed prior to the 1 April 2013 deadline before Jackson and LASPO reforms kicked in?

Anecdotal evidence suggests claimant solicitors have tried to ensure a maximum number of claims were filed pre April 1st deadline and certainly before the reduced fee levels start at the beginning of May. But we’ll only know when these are worked through the system. A large number of claims are being managed through the portal and I’m sure things will settle down in time. Really, claimant solicitors’ should have been adapting their business models to ensure they can meet the challenges of LASPO, which became law last year, and continue to provide high quality legal advice, rather than engaging in a frantic last minute fee grab. What they did was try to get as many claims processed on the higher fixed fee model. However those firms that are robust enough to do well post LASPO will. Insurers have been adapting to the post-LASPO environment about reform as well. A lot of work has been undertaken in insurance firms to ensure they meet the rules and respond to claimant law firms as quickly as possible to keep costs and delays to a minimum. One of the most perverse behaviours to transpire after the launch of the RTA

MC // May 2013

Portal was claims dropping out. Now, those that drop out are also subject to a fixed fee, curbing this behaviour and ensuring the process should work as smoothly as it can.

Q A

When will LASPO and the Portal expansion offer the purported lower policy premiums to consumers?

The insurance sector has made a very public commitment to ensure that any savings will be passed onto consumers. In the last quarter of 2012, car insurance premiums did reduce in anticipation of savings against low-value RTA claims. And this is a highly competitive market. Insurers can do one of two things: keep the savings, break the commitment they made and potentially lose market share or simply pass the savings onto the consumer. They will be forced to do the latter due to the highly competitive insurance market. The insurance industry spends almost £10billion per year on RTA claims. The reduced legal fees are a small but significant part of that. And they need to be seen in the context of a 10% increase in general damages in the latest Judicial College Guidelines and a further 10% increase in general damages following the Court of Appeal’s guidance in Simmons so there are other elements of the system which need to be addressed.

“It’s simply inconceivable that there are 1500 genuine and legitimate whiplash injuries occurring every day in the UK. This needs to be addressed – as does the ways in which the medico-legal system encourages and facilitates whiplash claims”

Q A

What are the biggest issues for the ABI and its members this year, regarding the claims sector?

There are two key areas of focus. Firstly on personal injury claims, especially whiplash. We have recently submitted a response to the Transport Select Committee Inquiry on whiplash to explore the contributing factors that have given rise to the compensation culture, costs issues and fraud. Fraud and exaggerated claims are key concerns when thinking about whiplash. Insurers spend over £2billion per year paying whiplash claims. It’s simply inconceivable that there are 1500 genuine and legitimate whiplash injuries occurring every day in the UK. This needs to be addressed – as does the ways in which the medico-legal system encourages and facilitates whiplash claims. There is also a need for a public policy debate about whether low speed shunts in supermarket car parks (for example) should attract the current levels of compensation awarded to the non-fault driver. This is a debate society needs to have as the cost of damages and fraudulent claims are passed onto those honest customers paying car insurance premiums. The insurance industry has, and always will, pay legitimate, honest claims as soon as possible. Claimant lawyers make money from whiplash claims – and they should do, they are businesses. They aren’t in business for purely altruistic reasons but it honest customers are tired of paying the price of lawyers pushing exaggerated whiplash claims through the system. That is why we also support the Government’s recent consultation on medico-legal evidence and the independence of those providing that evidence. For our part, the ABI has invested significantly into tackling fraud and are working closely with both claimant lawyers and others to share information to reduce fraudulent claims. And the ABI continues to work with the DVLA to ensure that the driver record information provided to insurers corresponds with that given to the DVLA at point the customer buys insurance. By working with the Police,

ABI Interview

we have also tackling the number of crash-for-cash scams.

Q A

And secondly?

Secondly, the ABI is involved in the Competition Commission examination of the private motor market; there needs to be a conversation about the cost of credit hire and the cost of credit repair market. The Commission is considering how those markets operate in what us a largely unregulated supply chain which adds unnecessary cost onto claims. Excessive credit hire and repair activities are part of the unnecessary claims spend and it needs to be

addressed. We should look at the systems used by other EU countries where customers often choose not to take the replacement vehicle on offer. In the UK there are huge incentives for the customer to take a hire vehicle which is often a far more expensive model than the car being repaired. Why wouldn’t you take a new model BMW if your VW polo is in the garage?

Q A

Will the claimant / defendant divide diminish or shrink post LASPO and Jackson as they forge new ways of working within the system?

on some issues and put that aside and work together on issues of mutual interest, fraud, for example. We are in conversations with the claimant legal community to share data. Claimant lawyers don’t wish to represent fraudulent claimants and insurance companies don’t want to pay a fraudulent claim. We hope that by continuing our discussions we can get to a point that works for both of our sectors. James Dalton, ABI

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The Opinions

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The OPINIONS

MC // May 2013

The Opinions

A manifesto for growth

s Steve White (pictured) takes over as CEO of the British Insurance Brokers’ Association (BIBA), the general insurance market has taken stock on its mandate to boost the sector and add value – particularly in light of its members’ role in the claims process. Its members include large and small businesses which want to cooperate with government to help the wider economy with new innovations and growth. BIBA has stated its commitment to working with the Government and other stakeholders on solutions in areas such as flooding, motor insurance premiums, the Employers’ Liability Tracing Office, the Equality Act and signposting, underinsurance, business resilience and continuity. A key part of the Manifesto also outlines its commitment to customers in the following way, directly linked to the claims industry: • Better insurance law: BIBA supports changes to insurance law from the Law Commission that ensures better clarity for consumers and businesses, and a competitive and fair legal framework for the insurance industry. • Lowering the cost of motor insurance: According to BIBA, motor insurance costs are too high and it wants to see them reduced. The BIBA eight point plan to reduce costs includes tackling fraudulent claims, excessive claims management costs, application fraud and helping young drivers. • Improving the insurance experience for customers: Among its aims here is to facilitate a solution for the future of flood insurance and will help to raise awareness and improve understanding of the consequences of underinsurance. The BIBA campaigning issues for 2013 are: Meeting customers’ needs 1. Promoting access to suitable insurance protection 2. Mitigating the impact of floods and major catastrophes 3. Reducing the cost of motor insurance 4. Helping customer compensation – (Employers’ liability) 5. Reform of insurance law Managing risks and supporting jobs and growth 6. Guarding against underinsurance 7. Tackling fraud 8. Promoting business continuity 9. Developing careers in the broking industry 10. Promoting international competitiveness 11. Developing the insurance industry Promoting fairer regulation 12. Regulation by the new Financial Conduct Authority (FCA) 13. Threshold condition four – adequate resources 14. The protection of client money 15. Revision of the EU Insurance Mediation Directive (IMD) 16. Financial Services Compensation Scheme (FSCS) Reform www.biba.org.uk

MC // May 2013

Whiplash: where are we now?

or months last year the industry was on tenterhooks waiting for the Ministry of Justice consultation on reforms to the whiplash claims system. At the time of writing, we are now in a similar position only this year we are dealing with the massive changes brought about by LASPO; and now waiting to see if the small claims limit will increase. What MASS would like to see Fraud undoubtedly exists in the whiplash claims process and the whole industry needs to work together to address this. We must put aside our differences and focus on finding the appropriate answers. MASS are talking to the ABI about sharing fraud intelligence and hope to hear from them soon. As a first step MASS members would like to see: • More forums in which the industry is able to discuss its problems holistically and the possible solutions, and; • A system where no damages are awarded without a medical and we look forward to hearing more from the Government on expert medical panels and whether or not they should be introduced and if so under what guise. However, we are deeply concerned about the government’s proposal to raise the small claims limit from £1,000 to £5,000. This will reduce access to independent legal advice and force motor accident victims to navigate their way through the complex process of bringing a small claim. The Government must remember that implementing the referral fee ban and the Jackson reforms in April 2013 has fundamentally changed how the industry operates. We should let this reform bed in before rushing into further change and reform. If ABI numbers are correct, then 93% whiplash claims are valid. Any further changes made to the justice system need to be carefully thought through to protect genuine accident victims’ access to justice. We must be sure we develop sensible, proportionate solutions. MASS have captured a package of simple reforms in the MASS Motor Claims Code that could address these problems and we urge everyone in the industry to give us their support. Craig Budsworth, Chair, MASS Motor Accident Solicitors Society and RTA Partner, Glaysiers

The Opinions

Improving support for Mesothelioma suffers

he ABI (Association of British Insurers) believes the Mesothelioma Bill in the Queen’s Speech will mean better support for more mesothelioma sufferers. People with the asbestos-related cancer mesothelioma in the UK will get more financial help under a package of measures in the Mesothelioma Bill announced in the recent Queen’s Speech and expected Ministry of Justice reforms. This will include support for up to 3,000 sufferers who currently go un-compensated, and a more streamlined system to speed up the claims process. Every week nearly 50 people die from mesothelioma, a cancer of the lining of internal organs, such as the lungs. It results from exposure to asbestos and is fatal. The Bill and expected civil justice reforms will improve the support to sufferers and their families, through: • A scheme to support mesothelioma claimants exposed at work who are unable to trace a solvent employer or insurer to claim against. This will be paid for by insurers. Over the next ten years around 3,000 sufferers will receive payments of over £300 million in total. The scheme will be operational in July 2014, although people diagnosed with mesothelioma from 25 July 2012 will be able to claim. • A simpler, more streamlined claims process with set timescales for providing information and fixed legal costs. This should mean that where there is a traced employer or insurer compensation is paid within 3 months, and 3-5 months where no traced employer or insurer. The Ministry of Justice will be consulting on this later this year. • To help speed up the legal process, the insurance industry wants to build an online portal for mesothelioma sufferers to register claims which will ensure that all relevant information is kept in one place. Otto Thoresen, ABI’s Director General, said: “Mesothelioma is a devastating disease which has a terrible impact on sufferers and their families. The insurance industry wants to do all it can to help sufferers and has worked with the Government on this package of measures that will deliver help to claimants much faster, including to those who would otherwise go uncompensated.”

Reform – much is still up in the air!

f the recent weather was supposed to be a metaphor for the claims landscape then the harsh chilling winds and cold temperatures should have given way to the warmth of spring. It should be time to relax.

The Jackson reforms have come in together with the first changes to the RTA Portal. All we need to do is keep an eye on the rules and ensure that we do not get into a situation where we have to apply for relief from sanctions ... if only that were true! The game has only just begun. For many businesses, particularly on the claimant side, their very business models have changed to the point where all seem agreed that significant consolidation will take place. No-one yet knows what costs budgeting is going to mean in practice. The messages so far have been mixed. The consultation on the small claims track has closed at the very moment that the Transport Select Committee decided to open its own consultation on the matter. The consultation on the discount rate is about to close. The Forum of Insurance Lawyers FOIL has argued that everybody needs to be aware of the law of unintended consequences. It seems counter-intuitive to look at changing a system when no-one knows what the system actually looks like. The most significant example of this is the suggested increase of the small claims track to £5,000 or possibly higher. This would affect the vast majority of claims that are made for personal injury. How can this be looked at, when no-one knows how the changes to the fixed fee within the portal and the introduction of the fixed fee outside it have only just been introduced? Any management consultant worth their salt will tell you that the more you know about the current situation the better prepared you are to decide the way forward. If you don’t know where you’ve come from, how do you know which way you are going and when you’ve arrived? Rod Evans, President, Forum of Insurance Lawyers FOIL

MC // May 2013

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The Opinions

Q: Is the personal injury sector ever going to lose its ‘cowboy’ image and is it a fair perception anyway? How will this affect those looking to merge with firms / create ABSs?

It is fair to say that neither the CMC Claims Management Company sector nor personal injury PI lawyers have the best reputation. However ask any reasonable section of society that is not involved in the sector to name a PI Law firm and they will struggle. Ask that same group to name a CMC or accident management company and they will reel off a number of companies, IL4U, NAH, Claims Direct, even The Accident Group.

companies are often the ones who have ‘image’ difficulties. The worry is of course that CMCs will be unable to come up with a model that allows them to exist within the regulatory regime. Yet there are a number of potential models that as time goes by will keep the CMC industry alive.

What the public don’t like is to have their privacy disturbed. Spam emails, text messages and cold-calling - all of which are of course specifically ruled out in the regulations for receipt of referral fee income whether LASPO compliant or not in PI cases - is really something they get fired up about. Nevertheless this doesn’t stop them from phoning the numbers and answering the adverts.

Furthermore it is of course designed to stop solicitors simply paying to get in work. What it will do is drive even more solicitors to enter into the CMCs space for advertising and web based claim generation. This will therefore mean that average spend will increase and therefore profit margins reduce, it will also let the public see the law firms themselves in the same light as the CMCs. There are of course already a number of law firms advertising whether under their own umbrella or under a trading style and although some more traditional lawyers might not like it, there seems to be little ill-will from the public.

Unfortunately and somewhat unfairly the regulator MoJ is seen to be a soft touch. However, with the huge numbers of CMCs no longer operating due to enforcement action, it has really helped clean up the industry. Unfortunately many of the players performing the spam text and calls are off shore and unregulated and leaving the MoJ with little ability to stop them. If small PI Law firms weren’t so desperate for work that they will pay anyone money for a case, then things would clean up even more so. The SRA has a similarly tough job in trying to stop those PI firms from paying unregulated individuals for cases and that task has become even more difficult since the advent of the referral fee ban in April 2013.

‘The Referral fee ban will remove many of the really small players who had previously seen a wider family become a source of income and in the last few months that has already started to happen’ The Referral fee ban will remove many of the really small players who had previously seen a wider family become a source of income and in the last few months that has already started to happen. Four or five claims a month is an above national average income, and these smaller

‘It remains to be seen what CMCs appetite for ABSs will be. Why would they want to give up control of their potentially highly profitable businesses?’

Appetite for ABS With regard the second part of the question, it remains to be seen what CMCs appetite for ABSs will be. Why would they want to give up control of their potentially highly profitable businesses? Furthermore the lawyers may have reservations about CMCs joining their own highly regulated businesses, particularly as some CMC’s are known for ‘corner cutting expertise’. The only way they can join together is if they receive an ABS licence from the SRA. As yet very few CMC/PI Law firm businesses have been granted an ABS licence, both the SRA and Law Society have expressed serious concerns at businesses simply looking for a way to get round the ban. The SRA confirmed that should the separate business entities subsist outside the ABS, then this may be a reason to refuse the licence. Nevertheless it is understood that there are approximately 100 CMC/Solicitor ABS’s awaiting authorisation, and this may well impact the landscape should most receive a licence. However if a CMC and law firm with long-standing close working relationships decide that teaming up is a good thing and they have already been proactive and made their application, then there is nothing to say that they wont be extremely successful. Alan Nesbit Chairman of the Association of Regulated Claims Management Companies ARC

MC // May 2013

The Opinions

Q: There’s a suggestion that marketing fees – if proven to be given for marketing services – may not be banned according to initial guidance on the referral fee ban from the SRA. What impact will this have on the CMC sector?

With introduction of LASPO there has been much debate within the sector about the justification of marketing fees, if they can be shown to be in return for providing a genuine marketing service. It is felt that a transparent and justifiable marketing fee is compliant compared to the previous ‘payment for nothing’ element of referral fees now banned by the SRA. The shift to adopting a service-led model over that of a referral fee arrangement has posed a challenge for many organisations, especially claims management companies. So how is the claims sector responding to the challenge of achieving compliant structures? One way of tackling the issue has been the emergence of a new generation of marketing collectives or cooperatives, such as the recently launched Simply Lawyers and other smaller scale initiatives at a local level. Pooling the marketing resources of their members to be invested in front line marketing campaigns previously carried out by other intermediaries. The closer relationship between members and the marketing activities means the fees charged by collectives are deemed to be compliant. Collective marketing across the entire practice, not just Personal Injury, also ensures compliance. Participation in marketing collectives provides other potential opportunities for Members. Fully integrated marketing campaigns can reduce reliance on a single channel such as Pay-Per-Click advertising, which has seen bid inflation as individual law firms take to Google Adwords in an attempt to replace lost sources of business. Collectives can help bridge the marketing knowledge and skills gap which undoubtedly exists within many legal practices, giving access to high level marketing expertise at a far more affordable cost than going it alone. Successful marketing collectives, however, will need to be more than a group of enthusiastic amateurs and instead must add value by providing professional marketing knowledge and expertise, not least to ensure compliance. The emergence of Joint Venture agreements between CMCs and solicitors - whilst effective at meeting immediate needs - may not provide the answers firms were looking for. Enforcement of the Referral fee ban by the SRA will prove difficult with undoubtedly elaborate schemes being put in place to hide behind the ban. It has already expressed their concerns and have stated they will be looking past the ‘on paper agreements’ to the practices of the parties involved. Matthew Waterfield, Head of Legal Development at Simply Lawyers

MC // May 2013

Q: Technology plays a significant part of keeping costs down in the claims sector but what impact does the extensive use of technology and lower fees have on expert advice and assessment?

Technology: A push of a button and the claim is settled? Think again...

Technology plays a significant part in processing claims from FNOL to agreeing costs, and settling claims. The days of the type writer and posting reports have gone but human intervention is still key to successfully reporting claims. As an independent engineering company who embraces technology we would simply not be able to process high volumes of claims without these advancements from Audatex, Glass’s and bespoke databases. These not only significantly reduce claim costs but also promote effective turnaround times. However you cannot simply press a button and the claim is settled, with all the relevant information error free. At the end of the day, the information received from these advancements in technology is only as good as the person who enters the information or where the information is obtained from, hence the relevance to have skilled and qualified staff to monitor and check the data that is received. Consider these questions: • Could you use formulas to effectively process every claim without human intervention? NO • Could the people sending the information fraudulently expose these formulas for capital gain? YES Human intervention is always going to be required as no claim is the same, and no data is error free regardless of where it is from. What would we all do if a simple thing such as the internet went down? Would we go back to using a type writer and posting reports? The only thing technology can do is reduce the necessity of human intervention. Robert Kelly, Key Account Manager

The Opinions

Q: There’s a suggestion that marketing fees – if proven to be given for marketing services – may not be banned according to initial guidance on the referral fee ban from the SRA. How will this impact the effectiveness of LASPO and the referral fee ban?

The industry is without doubt going through the biggest sea change seen for perhaps a decade. The model that existed pre-April and with it all the issues which became repetitive tabloid headlines by the way how much of my premium goes on my insurers advertising budget let alone on claims? is well and truly gone. It shouldn’t be forgotten that many CMCs were marketing firms before discovering the income that could be generated from personal injury. The transition some made in little time has to be admired but then again that’s their background of being nimble and reactive - they’re marketers after all. Regulation in 2006 formalised the process of referral and with it, relationships between law firms and now ‘licensed’ PI referrers began to compound. Those relationships have been mutually beneficial and exposed law firm and CMC to each other’s working practices. It’s difficult to believe that either wants to see the ‘old’ income streams dry up. LASPO came into effect on the 1 April and with it the prohibition on making/receiving a payment or even providing consideration for receiving another’s details. So the $64,000 question is; how do they continue to pass details and be paid? The easiest appears to be, on the face of it marketing collective. However this means, to pass muster from any potential scrutiny of the SRA it must be a true marketing exercise and not one paying mere lip service to the concept. So flat fees, no min/max on volumes imposed, compliant and transparent marketing would all be positive indications. The legitimacy of a marketing collective as being compliant to LASPO can be evidenced by the well publicised Accident Advice Helpline model and the fact that Quindell Portfolio plc decided to buy it lock, stock and barrel for an eye-watering amount. Others will surely follow the model but deep pockets they’ll need to have but most likely compliant they’ll be. CMCs, like it or loathe them has momentum, a previously lucrative business model which they’re reluctant to say goodbye to and with them lawyers who are reliant on their marketing skill to generate their work. Jim Toole, Operations Direction, First Response Law

Q: Will the balance of rights between claimants and defendants be distorted post LASPO?

Yes. Despite the commercial ethos of making a profit - we all really like fairness. Some genuine claimants won’t seek compensation because they won’t believe they will win, some will receive reduced service and compensation so justice won’t be seen to be done. I’ve never understood why a victim of an accident doesn’t receive compensation for all the inconvenience of having their journey disrupted, form filling, time wasted and daft questions asked for years to come.

When my first child became a named driver on my policy, my car insurance asked ‘who will use the car more?’. My answer: I drive 10 miles each day to work, the car will be ‘with me’ used by me parked within a police station for 10 hours. When I return home my child is likely to drive more miles in one hour, so you tell me who will use the car more. Why these questions? I suspect to provide reason to refuse or reduce any potential future claims. There are not many service providers who commence by accepting your payment with the strategy of securing rationale to avoid completion of their part of the agreement. Some may say we get what we deserve. This legislation stems from some claimant elements being too greedy in referral fee, fraud or acquiesce, some charges. So, what will be the effects of this new era? 1. Defendants will be more confident: evident already, they believe they have emerged better for this legislation. I’ve heard that claims will fall roughly into two categories; valid claims/defendants unsure - they will settle the claim quickly to minimise cost defendants believe they can negate the claim - they won’t settle and believe the claimant solicitors won’t have the appetite to go to Court because it’s not viable. 2. Both defendant and claimant solicitors will reduce staff some closing some thriving 3. The criminal element will discover new methods of fraud 4. Over time, the balance will be redressed and this period reduced to a distance talking point. What can you do? Accept, adapt, it’s time for innovation. Peter Parry, Managing Director, Independent Accident Investigations

MC // May 2013

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The Opinions

A call for further intervention

he UK insurance sector is one of the most sophisticated in the world. The competitive nature of the market and the price sensitivity of the buying public prevent insurers making excessive profits, as any attempt to do so would result in loss of market share. Any benefit from falling claims costs is passed back to customers through reduced premiums.

Q: Will the balance of rights between claimants and defendants be distorted post LASPO?

The wide ranging reforms to the civil litigation system are already presenting a fundamental challenge to the rights of accident victims and also the balance of rights between claimants and defendants.

Over the last few years there has been a marked decrease in road traffic accident frequency, which should have resulted in lower claims costs. Despite this, there has been a 60% increase in soft tissue injury claims since 2009 earning the UK the un-wanted title of ‘Whiplash Capital of the World’. As a result, motor insurance premiums have had to increase by unprecedented amounts, which are unsustainable for both the industry and the hard pressed motoring public to bear.

The civil justice sector is in a period of unprecedented change and post April 2013 there will have been a fundamental shift in the way the industry operates as the result of several packages of changes: the Jackson Reforms and LASPO Act 2012; the referral fee ban; reforms to the RTA Portal, including reducing Fixed Recoverable Costs; and Alternative Business Structures. The insurance industry is also being reviewed by the Competition Commission not to mention the Consultation into Whiplash claims and medical experts.

To address these problems, the Government passed the Legal Aid Sentencing and Punishment of Offenders LASPO Act and changed the way that claims were handled through the personal injury portal. Both of these initiatives are intended to drive down claims costs and insurers have reduced premiums on this basis, resulting in a double digit fall since the peak of the market. However, should these initiatives not be applied properly or if those parties who stood to lose out on fees find a way to work round them, the costs will not come down. Insurers will be forced to reverse the rate cuts, which will be detrimental for both the industry and motorists alike.

Each of these changes on its own would present a significant challenge to the entire legal sector, from the courts to individual solicitors firms. Together they will fundamentally change UK civil litigation.

It is difficult to determine whether the reforms have been effective at this point and premiums remain significantly above 2008 levels, despite many insurers applying drastic cost cutting measures. Our immediate experience one month post LASPO is that it has had a relatively insignificant effect on soft tissue injury claim frequency so far. In fact, the media is still crammed with ‘claim farming’ adverts that appear even more generous than the past! Further intervention is therefore inevitable. We need to return to a place where there is access to justice for genuine claimants and the motor insurance sector is a risk transfer mechanism to protect people, as opposed to being a reservoir of money that is tapped into by an insidious compensation industry. Peter Horton, LV= Chief Operating Officer- GI.

Members of the senior judiciary, including the Master of the Rolls, have already warned that together these reforms could ‘weaken and undermine’ access to justice and I agree. This combination of changes fundamentally alters the balance between claimants and defendants that has been so carefully sought in our system of justice over the years. I am deeply concerned that the reforms are not being seen in their entirety and that the unintended consequences of these changes will fundamentally shift the balance in the system between the rights of the claimant and the rights of the defendant. I am also concerned that there has been limited analysis of the impact these separate changes will have on each other and the industry as a whole. The cost of motor insurance is falling. Surveys published by insurers and aggregators are showing that insurance premiums have actually reduced. The reforms implemented this year will help to further reduce costs. APIL, under a Freedom of Information Act request, recently disclosed Government stats showing that claims have actually fallen. Before these proposals are taken forward the Government must conduct a proper impact assessment that considers the changes to the civil litigation system as a single package and reviews the impact on the accident victim and the balance between claimant and defendant in the system before carrying out any more reform. Donna Scully, Partner, Carpenters

MC // May 2013

The Opinions

It is entirely clear there are a number of routes to avoid getting caught by the terms of LASPO. One of those is possibly in relation to marketing fees. The question is, however, whether enough can be charged by way of such fees to make it worthwhile for Claims Management Companies CMCs. The conversations I have had with many CMCs in my capacity as Chairman of the Association of Regulated Claims Management Companies ARC is that CMCs are not looking to disappear from the claims arena. They still believe there is money to be made albeit not as much as previously due to the significant reductions in costs. One of the ways of achieving this is marketing fees; the difficulty is in relation to what the SRA and MoJ term a ‘profit element’. If the payment is for services and a reasonably perceived element of profit, based upon the kind of charges that a traditional marketing company would make, then there is a chance that will be ok. If the profit element is significant and in essence reflects a referral fee then this will be deemed in breach of LASPO and will have the expected consequences with the regulators. As it is on the regulated companies heads whether CMC or law firm/ABS to show how the amounts are made up and justified, this will require receipts for the various marketing formats used, SEO, PPC, TV, Radio, Press etc.. On this basis I do not believe the profit element on marketing will in any way bring in a significant enough return to impact the marketplace. It is far more likely that CMCs will seek to utilise non-prohibited referral payments where the client, after a recommendation by a CMC, has directly contacted the law firm. What is yet to be seen is how much the ABS solution will penetrate the market place - whereas a small number of CMCs have taken the plunge, it is by no means widespread. Alan Nesbit, Managing Partner Nesbit Law Group and Chairman of the Association of Regulated Claims Management Companies.

Q: How will the referral fee ban impact the insurance sector in terms of positive cost effects but potential increase in fraud through a lack of CMC vetting, as well as impact on insurers’ own referral markets. How true are comments that LASPO is a move in favour of the Insurance sector?

The cost of motor insurance is high on both the political and media agendas. The Competition Commission investigation has further increased the profile of the impact of claims costs on customers. There is a clear need to drive down costs on behalf of motor insurance customers and the referral fee ban is one such step that will contribute to this goal. However, banning referral fees alone may well have an adverse effect on premiums. For there to be a positive impact, we need to see the issue of excessive costs for customers dealt with in their totality, including tackling whiplash claims, fixed legal costs and fraud, as per the balanced package spelt out in the Jackson and LASPO reforms. At the heart of LASPO is a wake up call to the industry as a whole. The MOJ can legislate and force change, but the industry needs a change in mindset. It needs its gifted, intelligent people and we have many, to turn their attentions to building a new sustainable model for the market – one that truly puts the customer at the heart of its actions. In terms of fraud, it is unlikely that the ban will have a detrimental effect. While many CMC’s have a role to play in vetting fraud, there are others in the process that play no such role or encourage, inadvertently or otherwise, fraud. We have seen a challenging first quarter 2013 for the industry, as claims farming increased in advance of the reforms taking effect. Within Ageas we have seen an increase in claims made for injuries that the alleged injured party has no knowledge of. Such behavior is in the minority, but adds to the feeling that the current arrangements in motor claims are, as has been previously described, dysfunctional. Ultimately, the ban of referral fees and implementation of LASPO are a step in the right direction for the industry and its customers, but failure to deliver the reforms simultaneously risks reversing the very aim of the reforms and piling more pressure on motorists, employers and small businesses. If we don’t take this opportunity to change the way we work we risk facing more prescriptive legislation and the chance to steer these changes ourselves may disappear for good. Rob Smale, Claims Director, Ageas

MC // May 2013

The Opinions

Q: Do you know what diminution is? Can you pronounce it?

At Clifford James Consultants we believe that only those that can say it should deal with it. Sounds arrogant? It may be hard to believe but many claims handlers and their supervisors in both claimant and defendant firms cannot even correctly pronounce the word, never mind deal with it in a sensible manner where each case is looked at on its own merits and based upon the facts. At Clifford James Consultants we have an excess of seven years’ experience dealing with this specialist head of claim. I am proud that all our staff not only can pronounce diminution but understand the complexities of dealing successfully in diminution law. We have built up our experience to be able to identify those claims which will succeed beyond the myth that a claim can only be successful on a prestige vehicle with structural damage. Diminution can succeed on mainstream, fleet and commercial vehicles. That said we are not frightened to acknowledge that diminution cannot be claimed in every case. As claimant firms are clambering on board the diminution bus yes, diminution could even apply to a bus in the

right circumstances we are expanding our services to defence. Our successes mean that we are able to deflect those claims which are wrongly presented to insurance companies. This may be due to a lack of understanding by firms who are naively branching into this area of law to increase their costs. Even worse, there is now a tranche of engineering firms who are desperate to capture what is perceived to be more profitable work in this rapidly growing market. Unfortunately many engineers lack an understanding of the basic principles of diminution and focus on legal points rather than the engineering aspects of each claim. The net result is that claims are being presented which cannot be justified or defended on grounds that will not succeed in law. This benefits no one. Diminution is our core business and we are fanatical about remaining a market leader is this area of law. Our successes include recovering diminution on a wide variety of vehicles from a Toyota Hiace van through to an Aston Martin DB4 Series 5 and we are expanding the boundaries of diminution within realistic parameters. If you wish to discuss using our diminution service both claimant and defendant, please do not hesitate to contact us on 0844 88 050 88. Emma Bell, Director, Clifford James

Q: For the honest claimant, Lord Justice Jackson’s reforms are a welcome and very positive step. However, will the implementation of the reforms have a positive or detrimental effect on the level of detected ‘fraudulent’ personal injury claims?

Without doubt there was a mixed response and some consternation surrounding the impact of Jackson on the ability to detect fraudulent claims. The worry was whether increased damages, a lower costs risk, defendants’ costs being capped at the level of damages recovered and more restrictive investigation periods with the proposed extension of the MOJ portal* to motor and casualty claim up to £25,000 would see a ‘nothing to lose culture’ and more litigation. The trade-off is a substantial reduction in claimants’ legal costs due to the non-recoverability of conditional fee agreements and after-the- event premiums. It is also accepted that safeguards are in place for those ‘black and white’ cases in that there is a new provision for full costs enforcement in claims found to be ‘fundamentally dishonest’. There will, no doubt, be some test cases as to the procedural aspect and standard required to satisfy this new test. The main concerns are, as fraud practitioners know too well, that formal allegations of fraud are infrequent, and it has historically been rare for a judicial finding to that effect. We operate in the ‘grey area’ of suspicion, inconsistencies, credibility and inference which has

resulted in claims being discontinued. The reforms, in combination with legal authorities we have developed with our insurer clients, do provide the tools to defend these cases. There are provisions to strike out cases and seek a full costs recovery in several areas, such as there being ‘no reasonable ground’ for bringing the claim, an ‘abuse’ of the court process or for ‘conduct issues’ which are likely to obstruct the just disposal of the proceedings. In exactly what circumstances warrant a strikeout will certainly be tested following the landmark decision in Summers v Fairclough Homes 2012 and the following case of Fari v Homes for Haringey 2012. The most significant change addresses ‘enablers’. These are organisations such as credit hire and claims management companies, who have a financial interest in, and more importantly often drive, the litigation. It is now easier for us to pursue costs against them directly. What effect the reforms will have remains to be seen. There is, however, no substitute for strong antifraud strategies. These are critical if we are to take full advantage of the positive interlocking reforms. * implementation delayed until 31/7/2013 Raymond Southern, Joint-Head of Fraud, Berrymans Lace Mawer LLP

MC // May 2013

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The Opinions

Q: What is the intelligence strategy for choosing an expert, especially when the outcome of the case may rest upon their evidence?

A decade or two ago it was common practice for a solicitor who required an expert witness in a particular area of the country to trawl through the numerous guides to locate a specific expert in the field required. Over the years national firms emerged providing nationwide coverage of certain disciplines, such as vehicle accident damage reports. With experts grouping together within one firm, the knowledge base expands thus allowing companies to give a more thorough and extensive service. Large, national groups of experts are fortunate to have such extensively experienced specialists who are able to train colleagues in more widespread areas, creating a massive intelligence hub. Over the last few years in the motor expert arena, engineers have been asked to provide evidence on a whole range of automotive issues; from motor-sports incidents to the intricacies of a limited slip differential. Subjects such as LVI Low Velocity Impacts, diminution in value and fraud investigation forms a regular part of motor assessors’ work now. Whether a minor scrape or fatal accident investigation, any single report can end up in Court. It is therefore essential that an expert is completely honest, technically accurate and wholly independent when providing their evidence. Some companies have in-house experts and whilst they provide a cost effective solution to loss-adjusting and controlling claims, their lack of independence can be prove to be an Achilles’ heel when it comes to the Court room. The tendency to employ staff based on economy may attract unqualified or inexperienced staff looking to further their career. Again whilst this is great for the budget it can sometimes lead to an adverse effect on a Court case. In this day & age, solicitors are becoming more business minded and therefore rely on their expert to not only provide support for their better cases, but to be open and honest about the expert evidence in poor cases from the very start. The one-stop-shop expert witness companies who are strong enough to remain independent to those instructing them coupled with a high degree of integrity and expert knowledge will be those building the best reputation for supporting their clients, thus ensuring a continuity of business.

Q: Will the balance of rights between claimants and defendants be distorted post LASPO?

I’m writing this in the middle of April and I’m still catching my breath from the hectic month we had in March, receiving more than twice our usual weekly volume of ATE case proposals each day!

While assessing these cases, I couldn’t help but wonder how many of the claims would still be brought under the post-LASPO regime. For example a contract dispute claim for say £5,000 may need cover of £25,000 for adverse costs and own disbursements remember there’s no benefit of QOCS for non-Personal Injury cases. The staged ATE premium for this case at trial is likely to exceed the damages sought, as prospects of success as high as 80% would still give a ‘burning cost’ of £5,000, before adding overheads, expenses and a reasonable profit margin – and how many cases have 80% prospects of success at trial?! And it’s not just non-Personal Injury cases that have this problem. Lower value injury cases requiring significant expense on disbursements may not be pursued due to the size of the premium or due to other ancillary issues relating to ‘proportionality’. For example, as many as 65% of Noise Induced Hearing Loss NIHL cases may fail at the initial investigation stage. You may say that these cases shouldn’t have been pursued in the first place – but leaving aside the fact that without investigation you are unlikely to know whether the case is viable or not, that still leaves 35% of cases that are meritorious but may not be worth taking forwards any more. What about those claimants who do still pursue personal injury cases? Well if they don’t take out ATE cover to protect them in the event of failing to beat a Part 36 offer, there is every incentive for the defendant to pitch an offer just below the true value of the claim, putting pressure on the claimant to accept an undervalued settlement rather than take the risk that most if not all of their damages could go in costs if they do not beat the offer. So in short, it does appear to me that the balance of ‘rights’ has firmly moved towards the defendant postLASPO – but then again wasn’t that the intention?! Alan Strange ACII, Underwriting Director, LAMP Group Limited

Nik Ellis, MD, Laird Assessors

MC // May 2013

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The Opinions

Q: From both a policy holder and insurers perspective, what are the benefits of outsourcing claims handling through partnerships over potential ABS arrangements post Jackson reforms?

As the pressure continues to mount to reduce insurance premiums for UK policy holders, it is now more crucial than ever to be 100% efficient in all operational areas. Many operators have arrived at a significant junction and have serious decisions to make; regards the future of their claims handling services. Two key questions to answer; do we outsource? Do we look towards an ABS? Both options have their pros and cons but one thing is abundantly clear; choosing the right partners is critical; get this wrong and significant challenges will lie ahead. Outsourcing in a highly regulated market can make great sense in terms of claims handling and legal partnerships. Outsourcing can offer many a better and wider choice and removes the one size fits all scenario, allowing policy holders to be dealt with by specialist departments. This is particularly advantageous when dealing with niche brands and niche customer segments. In terms of savings to any insurer, this also can be significant as some providers offer complimentary outsourcing arrangements and can also provide alternative income opportunities from other auxiliary services post Jackson. Overheads can be greatly reduced with the right partner and mitigation of risk is also a great advantage avoiding the age old proverb of â&#x20AC;&#x2DC;having all your eggs in one basketâ&#x20AC;&#x2122;. Genuine 24/7 operations, flexible skill sets and staff training are also key advantages when outsourcing, especially as all training requirements and staff performance will be the full responsibility of any outsource provider. It is after all their core business and often, greater customer satisfactions levels can be achieved. Quality outsourced providers will also assist with the management of the entire supply chain and provide real time, reliable, user friendly MI. Management support of supply chains is important when delivering a robust customer journey and, if done to high standards, will go a long way towards minimising customer complaints. ABS has its merits and can bring healthy profit sharing rewards. However, choosing the right partner in either scenario is critical - stringent due diligence should be welcomed. Yet if an insurer can have both control and transparency over claims handling and legal processes - with the right outsourced partner - then the decision to move towards an ABS scenario of greater overheads, greater costs and greater regulation, needs to be seriously considered for all stakeholders concerned. Michael Davidson, Head of Strategy and Sales, Goldsmith Williams Solicitors

Q: Technology plays a significant part of keeping costs down in the claims sector but what impact does the extensive use of technology and lower fees have on expert advice and assessment?

The current economic climate has given a boost to the nature of some claims and volumes, however the knock on effect of investment in technology has the potential to counter act the additional business revenue. As consultant automobile engineers we constantly strive to keep our staff up to date with investment in the latest technology and equipment. The benefit of our investment assists us in keeping our staff running as efficiently as possible. We constantly review procedures and operational overheads to ensure this is the case. This is a necessity to continue operating on a profitable basis whilst keeping us at the head of a very competitive market. Quality and speed of service is our main objective. The GTA agreed rates which where incepted over a decade ago have capped most engineersâ&#x20AC;&#x2122; fees. These costs are now almost archaic and generally considered counterproductive. Whilst operational / overheads have risen steeply in the last few years the GTA rate has not been given any revision. Striving to provide a quality service and quick turnaround of reports. We tread a fine line between investment and maintaining first class services to our principals. Technology can assist in the delivery of prompt and accurate reports on a uniform platform. Our continued appraisal of technology, management and reporting software illustrates our commitment of investment whilst the restriction of fees prevents costs spiralling out of control and rising claims processing costs. There are always companies willing operate on lower returns based on high volumes which then in turn affects the content and quality of the end product. In conversation with other engineers we know we are not alone. There are numerous engineers struggling to keep their heads above water hoping for some light at the end of the tunnel. Whilst it is my belief that we have a strong business model which enables us to remain competitive, the restriction on fees hampers the amount of profit that can be reinvested. The average wage of an engineer has also been restrained thus stopping many competent individuals from entering this field of expertise. There are no doubt a number of individuals that could provide some renewed vigour and experience to the industry but are prevented from doing so as alternative employment can provide better remuneration. This is leaving us with a shortfall that in the not too far distant future many of the older engineers will have retired and minimal young blood coming through the ranks to replace them. There are always companies willing to operate on lower returns, based on high volumes, which then in turn affects the content and quality of the end product. Keith Crosier, Managing Engineer, Legal & Technical Assessors

MC // May 2013

The Opinions

Q: How is the insurance sector moving to help motorists, especially in the wake of Jackson and LASPO?

Jackson & LASPO reforms are now with us and the reaction from the claimant community has been extreme. Attempts to move the argument to the human impact as law firms and claims farmers lose their jobs have not met with much interest, but the debate that will grow and grow is ‘what are insurers doing for motorists’ now they have the changes we pushed so hard for. We are already seeing rate reductions from some insurers and the broker market. Losing its ability to discount from referral fee income is pushing hard for these to be as big as possible, as quickly as possible. Their fear is with the loss of referral fees, if direct writers move to reduce rates quicker than the intermediated market, their competitiveness is hit by a double whammy and the often predicted demise of the broker in Personal Motor is suddenly accelerated. So reductions are here but is it happy days for the motorist? Well maybe not quite as happy as they might expect! It’s a fairly simple calculation, reduced fixed fees with other pros & cons, multiplied by the number of whiplash claims but what number does it give? Currently the market seems to be settling at around a 3% reduction. I have done my own calculations & arrive at roughly the same number and the most ‘adventurous’ calculation I have seen from anybody else was only 7-8%. But that was from a Broker not a risk carrier! So a bit of a PR disaster is potentially awaiting us, but we need to push these savings through as quickly as possible and use our claims data to explain why premiums aren’t coming down more. We then need to focus on further positives that might be forthcoming. Extension of the Small Claims Track could have a much bigger impact – as could the cultural change that might follow when those claims farmers do go bust and stop hassling Joe public. Let’s hope so! David Williams, Managing Director, Underwriting, AXA Insurance

The wait is over...well, almost.

t the time of going to print, the long awaited Jackson Reforms have now, by and large, been implemented. As the clock ticked down to 1 April, those of us in the liability insurance sector saw the dissemination of information gather pace, with invitations to bespoke lectures, newsletters and e-mailed articles arriving daily. Some aspects in particular have touched a nerve. Industry stakeholders have grappled with the implications and anticipated behaviours of opposing sides arising from key issues such as Qualified One Way Cost Shifting QOCS or the additional sanctions under Part 36. One cannot help but feel that new battle lines are already being drawn up to contest the anticipated satellite litigation -expected to bring ‘certainty’ to some of the more ambiguous changes. For example, the meaning of ‘fundamentally dishonest’ for an adverse costs order under QOCS should keep the industry busy for some time...! But perhaps those claims colleagues who deal with personal injury matters would be better served by focusing equal attention on all the challenges that will come; with the new electronic claim procedures being run through the Claims Portal Co Ltd currently scheduled for late July. More to the point, wouldn’t insured clients be better served by this focus? With response times for portal claims being significantly reduced and breaches resulting in claims being thrown out - thereby losing the cost benefit. The need for robust claim management is greater than ever. Yet, having recently engaged a number of high profile organisations through the Airmic Academy, it is clear that meeting these time frames will be a struggle for many organisations, large and small. This will of course have a knock-on effect, but I wonder how many have discussed this with their insurance or claim handling providers? On a similar note, insurers question whether a provider’s philosophy behind claim resolution strategy will change in wake of the reforms? Again, little dialogue seems to be taking place. A small window of opportunity presents itself to claims functions across the industry. Now is the time for claim handlers to add value to clients by improving communication lines. After all, July isn’t that far away. Gary Pomfret, Casualty Practice Leader UK, Ireland & Asia Regions, XL Group

MC // May 2013

The Opinions

The Risk of Legacy Systems in Claims Management

or an industry whose sole purpose is to manage risk, isn’t it ironic that most insurance companies have left themselves open to so much of it? By continuing to use outdated, legacy IT systems, organisations are susceptible to anything from loss of customers, to loss of money and reputation. Claims handlers are faced with many unique problems – that lead to many real risks – when reliant on antiquated IT systems, including; weak analytics, ineffective fraud detection, lack of customer-centricity and data leaks within cross-company communication. Legacy systems have been collected and pieced together over a period of years. Because of this patchwork process, there are often several different statistical classifications used across a company’s business systems, making it extremely hard for claims handlers to generate useable analytics efficiently. Using disparate applications within an insurance organisation also makes it hard to achieve any sort of customer centricity. A company with a customer centric view has the ability to analyse customer data cleverly and identify suspect patterns of claims, an essential element in fraud detection. Without this holistic view, claims handlers pay claims they shouldn’t. Another problem that legacy systems present for any claims department is data protection, or the possibility of sensitive information ending up in the wrong hands. A claims handler needs to share documentation pertaining to a specific claim with other companies, namely lawyers and adjustors. The way in which old systems allow for this to happen could be leaving the company open to risk. On top of that, with BYOD Bring your Own Device becoming commonplace, you can never be sure where exactly a document will end up once sent, and on what device.

Q: How will ABSs affect the Credit Hire market - will there be more or limited opportunities for growth and consumer choice?

I think the challenges facing law firms and the challenges facing credit hire operators are broadly the same. If distilled to the essence, they can probably best be summarised as a getting work in the first place and then b, processing it profitably.

It therefore seems likely that we are going to continue to see a period of significant consolidation between key stakeholders in the motor supply chain over the coming months. The commercial case is compelling as legal firms try to diversify and open up new revenue verticals to replace reduced income; coupled with the synergistic benefits derived from reduced operating costs from all aspects of a motor claim through one consolidated endto-end process with integrated supply chain. If market forces and business drivers are there, then changes in the current distribution of claim volumes will follow. Law firms working in partnership with CHO’s will take advantage of their existing contracts and relationships, whilst the CHO’s seek to identify new opportunities from their legal contacts. We should expect that the recent press announcements are the first of many and result in further business marriages. Those who have already been through the dating game and found their ideal partners will have first mover advantage and this will no doubt reap rewards in the future. The number of opportunities in the market place will inevitably reduce, although the material value of each increases. There will unfortunately be casualties. Andy Whatmough, Director, S & G Response

The above issues put insurance companies at severe risk. Poor analytics and lack of customer centricity, which amongst other things can make fraud harder to detect, open up a company to real financial loss. Slow response times and inefficient customer handling leads to poor customer retention and the damage done to a company’s reputation after improper management of classified customer data would be catastrophic. Legacy systems are a problem affecting the whole industry. The good news is that there are solutions readily available. It simply requires a small amount of forethought and the courage to make a change. Richard Clark, Director, Xuber

MC // May 2013

The Opinions

Q: What role will mediation play in the claims sector post LASPO? Will the courts prioritise mediation/dispute resolution further in 2013?

The courts and the new costs regime will foster the increased use of mediation. I speak from the perspective of a litigator turned mediator with experience of fixed fees in various form, including the RTA Portal, and a long-standing association with the Civil Justice Council.

There will be new pressures both in favour of and against mediation, but litigators and the courts will now more frequently consider potential avenues to settlement, including mediation. 1 Proportionality, costs management and budgeting. The new regime involves looking forward in the litigation, in the context of the likely damages and estimated costs. This will inevitably mean thinking about how, when and why a case might settle. Where routine negotiations are not successful the court will want to know how settlement is to be explored, and this will work need to go into the budget. 2 Docketing and case management with teeth. Notice has been served of a stricter regime. The Court of Appeal is on standby as the enforcer. This blood-onthe-carpet approach will reach back to the work done pre-proceedings in that compliance, or otherwise, with Pre Action Protocols is likely to come under greater scrutiny. This is a move away from the environment where practitioners could tick a box to say that mediation had been considered and expect there to be no follow up. 3 Funders want risk management. More of those concerned with litigation, be they claimants, lawyers or funders such as legal expenses insurers, will now shoulder more risk. Inevitably, there will be a greater emphasis on risk management. Lawyers with a cavalier appetite for risk may find, where the outcome becomes pear-shaped, that they have both an unhappy client and a legal expenses insurer who prefers to insure elsewhere next time round. Mediation is a useful tool for the analysis and management of litigation risk. Judges are being provided with â&#x20AC;&#x153;The Jackson ADR Handbookâ&#x20AC;? to be published by OUP April 2013: http:// ukcatalogue.oup.com/product/9780199676460.do Litigators would do well to get their own copy. Tim Wallis, Mediator, Solicitor, Director, Expedite Resolution

MC // May 2013

Q: What will be the impact of a change in the Discount Rate in Personal Injury Cases?

The question obviously refers to the recent MOJ consultations on how the discount rate should be set in Personal Injury cases. The first consultation ended on 23 October 2012, with the responses still awaited.

This consultation was aimed at considering whether a claimant investor should be deemed to invest in minimal risk, index linked investments or, alternatively, a mixed investment portfolio. It was instigated because it has been argued, by claimants, that the current discount rate, of 2.5%, is too high and should be reduced to reflect that returns on low risk investments which claimants should invest in, post receipt of their awards are lower than this. The second consultation, commencing in February 2013, considers whether the current law is a sound basis for setting the discount rate and whether there should be a greater encouragement towards the use of Periodical Payment Orders PPOâ&#x20AC;&#x2122;s. This consultation is ongoing. There has not been the same intensive media coverage on these consultations as was the case with the Jackson reforms hence it is more difficult to get a steer on the MoJ thought process, however, there has been a serious suggestion that they consider that the current rate is actually too low. Put simply, a reduction in the discount rate will lead to increased multipliers to be attached to multiplicands for all heads of loss such that, overall, the level of future loss will increase across all heads of claim, thus increasing claims costs for insurers. The opposite is the case for an increase in the discount rate. Following on from their success in persuading the Government of the requirement for amendments to the law enacted by LASPO, the horizontal and vertical extension of the claims portal and significant reductions in Fixed Recoverable Costs, Defendants will no doubt be crossing their fingers for another success. In this instance, there is potentially more at stake for both the insurance industry and the Government, as if they get it wrong there is the very real possibility of damaging adverse media coverage of catastrophically injured people fending for themselves, their compensation having being depleted through poor investment returns. Such negative publicity would have no benefits whatsoever for the Insurance Industry. Richard Forth, Managing Director, Forths Forensic Accountants

The Opinions

Q: Technology plays a significant part of keeping costs down in the claims sector but what impact does the extensive use of technology and lower fees have on expert advice and assessment?

services for new claims set up and communication with other systems such as the MOJ Portal; automated document production from information held on the claim, and; input of data by customers and suppliers directly to the claim. However, important benefits come from the framework it provides to track progress and delivery and ensure that the advice provided is at the right service level. It also allows for controls to be added, to validate any advice to be given or action to be taken if it falls outside pre-determined limits. For example the use of A2A technology to connect local claims systems allows offers to be blocked if exceeding certain percentage changes from previous offers or those lacking supervisor authority. The integration of technical claims and legal knowledge within workflow systems also provides improved consistency of advice and service and is an important part of project and service delivery. Our insurer clients now expect us to deliver a technology solution using our own systems as an integrated part of the claims service we deliver. As the supply chain becomes more consolidated, this expectation can only increase.

Technology is an important part of any business but the current change in court fees which the MOJ stated was appropriate for ‘efficient and effective claimant solicitors’, makes it fundamental to protect margins and so ensure that quality of service can be maintained. A key area where the claims industry has used technology is the use of quantum assessment tools which allow organisations to ensure that the advice and assessment is applied consistently, and the level of offers is controlled. It then allows further efficiency such as with the PICAS settlement process where settlement is ‘automated’ where offers fall within historical settlement information. While this has to be balanced against the risk that previous experience doesn’t fully take in to account current practice in the claims that are adjudicated - as illustrated by the current level of Stage 3 award. It is also dependant on the information input by the handler the quality and cost controls are obvious. System efficiency delivers reduced time for standard and administrative steps: e.g. using data transfer

Mark Savill, Managing Director, Lyons Davidson

Have you seen our sister publication Modern Law Magazine? To arrange your free subscription please e-mail charlotte.parkinson@charltongrant.co.uk The Business of Law

The Business of Law

July 2012 | Issue 1 | ISSN 2050-5744

November 2012 | Issue 3 | ISSN 2050-5744 Dominic Regan begs lawyers to budget in the multi track, avoiding the ‘frightener’ of recent judgements

Craig Budsworth assesses the likely effects of changes to the small claims limit. Rob Gurney reflects on the process of becoming an ABS 6 months after authorisation as the first designated ABS.

The Business of Law

Sector Roundtable: MLM gathered experts, regulators and champions of the conveyancing sector to find out what’s affecting the market, who has the advantage and how to maintain success

September 2012 | Issue 2 | ISSN 2050-5744

The Institute of Professional Willwriters and the Council for Licensed Conveyancers shed light on reserved legal activities.

The Business of Law

Man on a mission: Antony Smith interviews Mitch Kowalski on his latest book that’s causing a stir across the globe and online

Dominic Regan urges lawyers to ‘change or else fail’ in light of ‘unstoppable’ reforms.

Emma Waddingham reports exclusively from Westminster on the recent All Party Parliamentary Group roundtable on the future of legal services. Rob Terry, Group CEO of Quindell Portfolio PLC speaks to Modern Law about how he manages standards and clients across one of the largest legal services portfolios in the country.

ABSfabulous: Are ABSs as compelling as the hype suggests?

“Lawyers are as successful as they are smart and innovative. Now is the time to display these attributes and need to be aware of every opportunity to them on the open market.” Des Hudson

The People’s lawyer: Greg Shields asks if law firms are actually any good at putting people first.

Modern Law Magazine | March 2013 | Issue 5

Modern Law Magazine | September 2012 | Issue 2

“Barristers contribute to the reform of law, assisting government and doing so for free – you can’t label, regulate and commoditise this, which the LSB is sometimes keen to do” Maura McGowan QC, Chairman of the Bar Council

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“We must not forget the purpose behind reform; that clients need to be put ﬁrst by the legal profession. If this results in a more competitive marketplace then this can only be good for the client” Michael Napier

James Caan

“ABS’s are an opportunity for innovative fast-thinking lawyers to create exciting new enterprises and provide a better service for the consumer.” Jonathan Djanogly

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The Opinions

Q: Technology plays a significant part in keeping costs down in the claims sector but what impact does the extensive use of technology and lower fees have on expert advice and assessment?

My brief answer is: Nowhere near enough…Yet. As the CEO of a technology company, dedicated to improving the auto claims sector, I’m immersed in technology daily - and have been ever since starting a BSc in technology management back as a teenager. So of course I do come with baggage on the subject. People expect me to be sitting firmly with the pro-technology lobby. And I readily sing the praises of what technology has already achieved in the sector: underpinning better / cheaper / faster advice and assessment. Then in the next breath I’ll go on to explain why we are now reaching the end of the particular road we have been traveling. Doing more of the same via technology - albeit a little faster or with ever greater precision - will offer everdiminishing returns. So now is time to map out new routes altogether and integrate people and technology for: • optimising processes • automating activities • understanding data • improving performance I am talking about fundamentally reviewing and rethinking how things are done. Not just accelerating old ‘manual’ activities but building easily accessible, relevant, managed, quality data right into the heart of our sector; to be handled by both efficient technology and expert people, each playing to their own strengths. Take FNOL as just one example. Traditional methods, basically long unchanged, are now being replaced by data-centred triage, supported by both technology and human experts: • with the right software support, the existing call centre staff can efficiently and reliably cost any incidents which are minor including sub-excess, without calling on other resources • the same staff score impressively high accuracy well above target identifying write-offs • leaving the vehicles ‘in the middle’ - with most of the routine analysis already completed - for expert advice and assessment. The results? Huge improvements in overall accuracy, time, cost and customer satisfaction which is why it’s an indicator of the way things will be going. Expert advice and assessment should also be profitably deployed where they add real value, alongside technology to bear the heft. Such transition may seem disruptive, it is but our sector needs it. If questioned, most might prefer just more incremental change. But remember what Henry Ford said: “If I had asked people what they wanted, they would have said faster horses”. Michael Nixon, CEO, Inter-est Ltd

From LASPO to ASHE 6115 – impacts and opportunities Q: There’s a suggestion that marketing fees – if proven to be given for marketing services – may not be banned according to initial guidance on the referral fee ban from the SRA. How will this impact the CMC market? A: My view is that the debate as to what is or is not a banned referral fee is irrelevant. The simple fact of the matter is that to provide even a very basic level of service to a claimant for a predicted income of £500 will certainly leave nothing in the pot to pay for any sales or marketing expenditure – of any form. Q: How is the insurance sector moving to help motorists, especially in the wake of Jackson and LASPO? A: Insurers are already deploying the tactic of premedical assessment offers extensively. This and the new Part 36 rules threaten to replace justice with a Claims Casino. Even under the old regime there were many examples of early offers having proved to be totally inadequate in the light of eventual outcomes. There will be many more of these instances. How can the solicitor give proper informed advice in these circumstances? Practice protection will become a serious issue. Q: Red tape or reassurance: what would the creation on a panel of independent, accredited medical expert panels mean for the sector and how can those responsible for formulating these panels ensure they are efficient and effective? A: This has to be one of the more absurd propositions mooted during the whole Jackson/LAPSO era, as evidenced by the total lack of progress towards implementation. Apart from other considerations the cost would be prohibitive, the difficulties in recruiting experienced and competent experts insurmountable… Q: Will the balance of rights between claimants and defendants be distorted post LASPO? A: LASPO does much more than swing the balance of rights in favour of the defendant. These changes fundamentally undermine claimants’ rights. Access to justice will be closed to many millions of innocent victims. The baby has gone down the plughole with the bath water. The consultation process was seriously flawed, and the response from the legal profession inadequate and ineffective. As the public at large become more aware of the implications of this legislation, it will come back to haunt those responsible. Will LAPSO be Cameron’s Poll Tax? Q: The impact of the reclassification of ASHE 6115? A: A real hot potato and one which even the actuarial profession is struggling to come to terms with. The underlying problems of PPO orders – uncertainty and future cash liabilities- have not gone away, ASHE 6115 is yet one more unknown. Tony Rand, Managing Director, Kingsley Law Ltd

MC // May 2013

The Opinions

The referral fee ban has been controversial since it was first suggested. Many commentators, myself included, think it is an unnecessary distraction and simply over complicates a world which is going through revolutionary change in any event.

My personal opinion is that this was nothing other than an opportunity for Jack Straw MP to raise his profile and leap onto a hobbyhorse, his party having lost the election and therefore being out of office. Anyone in the industry knows that referral fees are an irrelevance if the recoverable legal costs are set at a sensible level. The initial paper issued by the SRA was not particularly helpful but having considered the responses to their consultation the subsequent document is far more enlightening for practitioners. What is clear is that whilst a very broad interpretation of a ‘referral’ will be adopted by the SRA, it accepts that such referrals can be made, so long as there is no payment directly in return. As such it ought to be possible to build marketing or sponsorship initiatives which will be robust and sidestep the ban in isolation. However, if the recoverable fee levels are reduced below a certain level then who will have money to spend on marketing in any event? And what of access to justice I hear some cry? We need to remember that the SRA never wanted to police this ban but it was foisted upon them. Drawing up the guidance as they have allows sensible arrangements to be made and frankly if practitioners are stupid enough not to embrace the change and enter into new style business models then more fool them and they deserve the full wrath of the regulator. If anything, the guidance suggests that the enforcement of the ban ought to be relatively straightforward because the regulator has made it clear what will and will not be tolerated. As I said earlier of far more significance is the level of recoverable fees as without income, lawyers simply won’t be able to afford to market their services! Anthony Hughes, Partner & Chief Executive, Horwich Farrelly

MC // May 2013

Q: Technology plays a significant part of keeping costs down in the claims sector but what impact does the extensive use of technology and lower fees have on expert advice and assessment?

It was only in 1992 that the first commercial text message was sent; today the number of text messages sent everyday exceeds the population of the planet. We are certainly living in exponential times when it comes to the development and application of technology and undoubtedly it will play a pivotal role within the claims sector. Those within the industry acknowledge significant step changes towards greater efficiency. However, these improvements have been exceeded by public expectation. Consumers want the immediacy they get it in many parts of their life. The claims process will need to fall in line with consumer expectations of speed, information and cost certainty. When dealing with low value cases, technology has been applied across the process, reducing administration time and cost to all parties. Many experts will base their fees on an hourly rate, rather than a unit cost. By providing experts with clear instructions and removing the administrative burden through technology, the expert is able to reduce unit cost without compromising their hourly rate. In order to ensure quality of the expert advice and assessment, the time spent performing their ‘expert duties’ on a case should not change. Efficiency and technology should not be considered ‘dirty’ words in their own right. However, technology only works to achieve customer satisfaction if it is implemented within a service based approach and backed up with well trained and knowledgeable service staff. It is conceivable that the administrative process in ‘standard’ cases such as low value whiplash can be handled entirely without any direct human intervention. Although the technology to completely commodotise the process is perhaps not quite here yet, my feeling is that it is not too far away. Eventually, pricing pressure and customer choice will determine where the balance lies between the faceless world of technology and the need for human interaction. Fortunately, no commercial computers can currently exceed the computation capability of the human brain – but, it is predicted that before 2050, a computer costing less than £500 will exceed the computational capabilities of the entire human species! Bippon Vinayak, Chairman and CEO, Doctors Chambers

The Features

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The Features

MC // May 2013

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Features

We’ll miss the good old days Will we really miss days gone by for legal services and will the clients? Tony Walton visualises a worryingly possible scenario and, like an episode of The Office, you’ll either love or hate the implications...

“We both work in call centres.”

t was a bright cold day in April 2013, just after one in the afternoon. Simon and Hayley, a couple in their late 20s looked round the reception area in the solicitor’s office. Very nice, thought Hayley, as she admired the minimalist decor. The paint still smelled fresh.

“That’s super.” Simon and Hayley looked at each other a little nervously. Hayley spoke up. “We think you’ve got a cheque for us to collect; something about an interim payment. That’s why we came in?”

“Mr Gonzales will see you now,” said the receptionist and they all walked through a frosted glass door at the back, down a corridor and into his room. As they walked in, the contrast was amazing. It must have barely changed since the 1970s. Everywhere they looked, they saw paper.

someone like me on the job makes all the difference, if I say so myself, hahahaha!”

“We’re sorry we kept you waiting a few minutes, Mr. Gonzales, we couldn’t get parked.”

“Did you get the e-mail I sent you last night?” interrupted Simon. Mr. Gonzales looked surprised.

“Yes, I know, it’s terrible round here. Anyway, take a seat while I look for your file.”

“Do you want to check on your computer?” As he spoke, Simon wondered why the boxy old monitor at the corner of the desk wasn’t switched on. “I emailed you details of our loss of earnings.”

Mr. Gonzales was grey haired, but probably not that old, they thought. He looked tired, like he’d been in the office since six this morning. As he looked around, Mr. Gonzales kept talking, although Simon and Hayley weren’t sure whether it was to them or just to himself. In fact they could hardly hear him now. At one point, Hayley thought she heard him shout “Cairo!” and then mumble something about being very drunk, although he may just have said “I’ve found it in this trunk”. “You were very lucky to have your accident when you did. If it had been a week later, we’d have had to put it through this new-fangled portal thing. That’s the trouble these days...” Simon and Hayley looked at each other. Too late, he was off again. “...It’s all call centres and kids. Here at Dedslow & Stopp, we only have solicitors handling personal injury claims. We’re great listeners, passionate about giving our clients the service they deserve. Having

“Oh. My secretary mustn’t have printed it off and put it on the file yet.” “Don’t you use your computer?” “Well I don’t personally, though I know we spent a fortune on a case management system a few years back. The trouble is, I don’t think it really suits a straightforward road accident claim like yours.” He kept on sifting through more papers. “Aha, here we are! I must tell you, we had a funny mix-up the other day. I was looking for some GP notes on a file when I pulled out a copy of Top Gear magazine! It turns out my secretary had put the magazine on the file and the client’s GP notes on the table out in reception. Just as well they were only out there for about a month. We told the client and he saw the funny side. At least that’s what my secretary said. Now, remind me, where do you work?”

“Have I? I’ll go and have a word with my secretary.” As he stepped around his desk, Mr. Gonzales suddenly lurched over and clattered against a filing cabinet. “Are you alright?” Hayley asked. “Rex! How many times have I told you?!” As he spoke, an old beagle appeared from behind the desk, hobbled to a different part of the office and curled up again to go back to sleep. After what felt like an age, Mr. Gonzales returned. “It’s still in dictation. The letter should come out to you in the next couple of weeks.” “But can’t we just...?” “And do you know what they’ve just done? They’ve cut our fees! I tell you, they’re going to struggle to keep up the quality of service. You can’t beat putting a solicitor on the job...” Hayley looked at her watch. “Actually, Mr. Gonzales, we need to get back to work...” “Oh, don’t worry about my bill. The insurance company pays for all of this. Yes, all these changes. They’ll never improve on the good old days.” Simon and Hayley just looked at each other again. Tony Walton, Managing Director, Questus - the legal outsource specialists.

MC // May 2013

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Features

Good relations? LASPO & the Jackson reforms, the ever-increasing numberof personal injuryfocused ABSs and joint ventures between insurance companies and lawyers, have led to a more unique relationship between claimant and defendant legal practitioners, as Anthony Hughes reports. Polarisation – the claimant / defendant lawyer divide Watching the debate for the last few years regarding the Jackson reforms and the subsequent amendments - particularly those from Jack Straw - has been very interesting. Some people sit in their own silo and don’t really consider the world at large; for example, what do defendant lawyers think that they will be doing if the claimant industry is destroyed? I simply use that as a rather extreme example to provoke thought. There is a generally a great deal of common-ground amongst lawyers of all dispositions; for example we all agree that fraudulent claims are a scourge of society and the vast majority would like to see an end to the unsolicited text messages that so many of us receive. Those of us who do not live in a silo and I would count myself amongst this group also recognise that there is a real danger of throwing the baby out with the proverbial bathwater by the implementation of some of the reforms that are now being introduced. We must not forget that Jackson made his recommendations, ignoring the development and implementation of the MoJ Portal in its entirety as one example, and so his interlocking reforms took no account of that. Whenever there is radical change - I would certainly class the new costs proposals in that bracket - people have a tendency to re-trench as a protective measure. My perception is that in most quarters the development of the Portal has seen a great deal more collaboration between the claimant industry and insurers. My concern is that this will now disappear as claimant lawyers feel they have no alternative but to look for every opportunity possible to increase their recoverable fees. The view is very clearly that the insurers have won this particular battle and one response I am expecting is that co-operation will be withdrawn in terms of flexibility on cases. Claimant representatives will also have to seek to operate in a world of maximum efficiency, exploiting any weaknesses that are evident within the compensator community. As they say, ‘live by the sword die by the sword’.

“My perception is that in most quarters the development of the Portal has seen a great deal more collaboration between the claimant industry and insurers. My concern is that this will now disappear as claimant lawyers feel they have no alternative but to look for every opportunity possible to increase their recoverable fees” Alternative business structures After what seemed an inordinate delay we are now seeing a

Anthony Hughes, Chief Executive, Horwich Farrelly Solicitors Anthony has worked with a number of leading Manchester law firms and has specialised in high value insurance matters arising from road traffic accidents, accidents at work and health and safety issues. He also has expertise in fatal accidents including a criminal element in terms of dangerous driving and death by dangerous driving. He joined Horwich Farrelly as Chief Executive in May 2009 and is also a member of the Executive Committee of leading lobby organisation the Forum of Insurance Lawyers flurry of activity as new structures become approved by the regulator. Obviously the ones that catch my eye are those involving insurers and their joint-venture relationships, so as to preserve income from the non-fault sector. There is of course a huge sense of irony in this respect bearing in mind the ABI stance on both referral fees and recoverable costs. Many commentators have got very excited about this but in truth how different will it be to the old-style referral relationships that previously existed? True, there is now more visibility and more of a BPO style relationship but otherwise my suspicion is that it will be business as usual. The more intriguing question is whether these joint ventures spread their tentacles into other areas of work in the medium or long term. Many of us have talked about providing a one-stop-shop in the claims industry for years. Very few can really say that they do it or indeed have the skills to provide such an opportunity. You really could see an ABS doing just that because multiple

MC // May 2013

Features

“If nothing else most lawyers of all persuasions agree that market consolidation will be an inevitability of ABSs. Quindell Group is certainly doing a good impression of this buying up companies with the speed of a kid in a sweat shop” disciplines can be brought together under one roof, first notification, mobility solutions, rehabilitation, claims legal services, investigations, medical examination and the list goes on. If nothing else most lawyers of all persuasions agree that market consolidation will be an inevitability of ABSs. Quindell Group is certainly doing a good impression of this buying up companies with the speed of a kid in a sweat shop. What does intrigue me and possibly disappoints me is the lack of activity in the defendant sector notwithstanding two high-profile ABS authorisations in the form of Parabis and Keoghs. Both were expected to change the defendant landscape by making significant acquisitions but neither have shown any real signs of life at present. In reality, how deep are their pockets? Response to consultations Interestingly I was with Professor Fenn recently who confirmed that the work he did for the Government on the costs consultations did not turn out as they had hoped, so they simply chose to bury it and ignore the data, an interesting approach! Costs disputes It is a myth that there is any kind of costs war at the moment. Yes firms such as mine have a large costs department which are engaged in auditing and adjusting costs so as to ensure

that they are fair - but compared to the Callery v Gray days this in all far more gentlemanly. Claimant and defendant representatives alike stand their ground and want to get the best results, which I accept will be even more the case now recoverable fees are deflated. However the rules are the rules in terms of recoverability, proportionality etc. You also need to remember that fighting costs cases is an expensive exercise particularly when you lose! The big question is whether or not a new battleground will be drawn up. The 20% exemption within the fixed costs regimes is an obvious target and I fully expect parties to adopt a variety of tactics so as to push cases along the litigation pathway as quickly as possible. Then they may try to settle disputes at what they see to be the optimum point. Cost budgets will also be a challenge albeit in relative terms the number of these cases is small compared to the volumes in the sub £10,000 bracket. One question I haven’t been asked - and indeed many people seem to be overlooking - is the impact of all this on the consumer. Driving fees down means the cost of production has to reduce, yet customer expectations have never been higher. Squaring this circle is possibly the biggest challenge for all of us, whether we represent claimants as consumers or compensators on a B2B basis! Anthony Hughes, Horwich Farrelly.

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Features

Reconsidering the Approach: catastrophic injury claims Stuart Brown QC reminds practitioners to look at the real value of damages to a catastrophic injury claimant and how the finances should be used and/or invested in outside the box, to ensure long-term and real benefit for the injured party.

here is a terrible temptation to which we all, when acting for seriously injured claimants, succumb, namely to seek the maximum possible sum and this month saw the first ever award with a capitalised value in excess of £20million without focussing upon whether and how those monies will actually improve the claimant’s quality of life. Of course, there are issues which lawyers should be revisiting and which principally fall within our field of expertise. Many of these were the subject of presentations at our claims at a recent symposium run by Parklane Plowden. Let me mention a few briefly and one at rather greater length. The scandalous delay in revisiting the discount rate has undoubtedly resulted in serious under compensation. Hopefully this saga is nearing a conclusion. Professor David Bates, consultant neurologist, reminded us of the risks of future deterioration but only a tiny number of cases mostly industrial disease claims utilise the provisional damages procedure - and I confess to never having encountered a variable Periodical Payments Order. Housing a return David Cowan a housing expert and I presented a session looking at the method of calculating accommodation claims. The decision in Roberts v Johnstone is now more than 20 years old. There may well be room for doubt as to whether, even then, it was the ‘elegant’ solution claimed by subsequent courts. Certainly it left Mr Roberts out of pocket but, with fast

MC // May 2013

rising until recently house prices and falling rates of return, the shortfall produced by the formula is now a real problem. For a claimant with additional capital housing needs of £500,000 by no means unusual and a 50-year life expectancy the formula produces only two thirds of the sum needed but if the life expectancy is short then the shortfall is crippling. With a 20-year expectancy, the claimant only recovers 40% of what is needed. A succession of government and judge led committees have visited the issue with suggestions as to legal charges, trust mechanisms or payments of actual mortgage monies through periodical payments - but a solution seems no nearer. The problem is made still worse through the interplay between capitalised sums and periodical payments. The impact upon applications for interim payments see the line of cases beginning with Eeles v Cobham Hire Services 2009 EWCA 6204 means that many young claimants and their families simply cannot purchase much needed accommodation at the time such is most needed. Expert opinion Other issues considered need expert input but that expert input requires legal scrutiny and review. Are initial in-patient rehabilitation services used sufficiently often and are those services readily available; of the necessary quality and located sufficiently close to a claimant’s home and family? Professor Mike Barnes pointed out that there is now a new consortia of rehabilitation providers but recognised that cost, usage and location problems remained and that the real problem was the absence of community follow up post-discharge. Value for money Six figure annual care claims are

commonplace with figures in excess of £200,000 p.a. frequent. However, surely we should be asking whether such regimes are designed to do more than keep the claimant safe and well or whether there is not more scope for using the carer to assist in proper community re-integration and the pursuit of former interests and hobbies. Are claimants and the paying insurer or other body really getting value for money? Rapid advances in technology now offer real assistance to seriously handicapped claimants but Richard Caley a specialist in assistive technology having reviewed some of the myriad new mobility, communication and leisure aids, reminded his audience of the need to ensure such equipment was suitable for the particular individual and that expensive aids did not end up discarded on the wardrobe floor. Finally financial advisers, after reminding us of the need to fully investigate pension claims following recent new legislation, urged us to give greater thought to how monies are received and thereafter invested. Should we still routinely be restricting periodical payments to care and case management or should the ‘investment return’ available through indexation persuade us to include therapy and Deputy costs as well as earnings losses? Is there still greater scope for Personal Injury Trusts and the newly recognised Minors Trust? These are all issues we should be considering rather than simple resort to the most recent edition of Facts and Figures. Stuart Brown QC is a member of Parklane Plowden chambers, Leeds & Newcastle

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14/05/2009 12:39

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15/04/2013 13:56

Features

Interview with... Donna Scully, Partner, Carpenters Donna Scully, Partner at Carpenters and immediate-past Chairman of the Motor Accident Solicitors Society MASS speaks to Modern Claims about the issues facing the PI claims sector – from business planning to further reform in the post LASPO landscape.

How has the post-Jackson / LASPO reform market changed for your insurer clients?

On the one hand referral fees are banned under LASPO so income is down. However, on the other hand, savings are up tenfold. CFA recoverability has changed, costs are reduced in portal by 60% on 30th April and there will be further reductions on fixed recoverable costs and post issue costs. The Portal is to be extended in motor and to be introduced in EL/PL around July this year, together with the fixing of EL/PL costs for the first time. So, there are huge underwriting savings for direct Insurers on the way. There is also a hope that the number of claims, particularly fraudulent claims, will reduce due to less CMCs being around and less advertising. It’s a ‘wait and see’ now as to how much income is lost through referral fee ban versus how much savings there will be on the widespread reforms in our market. I suspect the savings will outstrip the lost income by a substantial amount.

Q A

What have you had to look at as a firm in light of reform?

Well all Contracts were ‘renewable’ on 1 April with the change in the law so that put a lot of pressure on the firm and took a lot of time and effort. The major reforms in this market have meant that business plans, contracts etc. had to be redone, particularly around the referral fee ban and the huge reduction in legal costs. Like any firm we have to look at how we can still deliver a quality service to our clients but with less income but to be fair we have prepared or a long time for 1 April and the changes. We have invested hugely in IT over the years

MC // May 2013

and we try to be a processed as we can whilst still looking after our clients well. The clients still want a personal touch and they want to deal with nice professional people too. Our staff are a huge part of our success story too and it is their expertise and commitment that make a difference.

What are the key challenges ahead for your firm and the wider claims sector?

There are many challenges. You have to continue to do a good job for the client but on less income. You have to be wise about that and make sure your firm is as efficient as possible. ABSs are another threat coupled with consolidation. If Insurers set up joint ventures with law firms, will there be any work left for anybody else? I suspect the claimant side will look a lot more like the defendant side in a few years; not many firms but those that do exist will be big. I am also concerned about fraud and

“A professional business can be very effective and economic for Insurers...who they outsource to must be excellent to protect their very important brands. It must be a partnership”

Donna Scully, Partner, Carpenters Donna Scully was born in Dublin, qualified as a Solicitor in the UK in 1995 and went on to work in London at Mishcon de Reya and Jeffrey Green Russell Solicitors, amongst others. She set up a personal injury department at Carpenters Solicitors in 1997. Donna has been a member of the Management Committee of the Motor Accident Solicitors’ Society MASS, and was Chairman in 2010-2011. Donna is also a long standing member of the Association of Personal Injury Lawyers APIL. She is a keen supporter of the victims of accidents and has long campaigned for their rights.

Features

“If you don’t have to pay for a case anymore, will firms care whether it is good or bad? If not, then, ironically, claims and fraud will increase not reduce as everybody hoped. Imagine that. All that reform for a situation that is worse than before.” that it doesn’t increase in the new world. If costs have been reduced so dramatically, will there be enough money to continue to fight fraud and do the risk assessments? If not, fraud will flourish and nobody wants that. With referral fees gone, will any old case be presented to Insurers and vetting go out the window? If you don’t have to pay for a case anymore, will firms care whether it is good or bad? If not, then, ironically, claims and fraud will increase not reduce as everybody hoped. Imagine that. All that reform for a situation that is worse than before.

Do we need further reform of the court system and processes to ensure a more effective claims resolution market?

Yes we do but I can’t see that coming soon. You saw how little training the judiciary got on LASPO and we see how slow and antiquated they are in dealing with cases. I can only see that getting worse if claims and fraud increase and can you just imagine if the small claims limit goes up.

Q A

What are the key areas of reform coming forward that need to be addressed by the sector?

There are a few but let’s start with Whiplash Consultation. This looks at medical agencies and raising the small claims limit. I am hugely concerned that the Government are even thinking of more reform now having implemented so much in such a short space of time. It is chaos already! I also can’t see where it fits into all the reforms? Wouldn’t it be sensible to, say, wait for at least 12 months and see what impact the present reforms will have? They might achieve what Whiplash Consultation is looking at anyway? It is inconceivable that we face the proposition of a rise in the limit and a governmenttype outsourced medical panel at present. For goodness sake, we are just trying to get to grips with the mess that is LASPO! There has recently been a consultation on uninsured drivers and we have Discount Rate consultation too - not to mention the investigation into the insurance industry of the Competition Commissioner. Unbelievable.

Q A

What are the biggest concerns / opportunities for the relationship between insurer clients and firms ongoing?

I mentioned the concerns earlier in terms of increase in claims and fraud but looking at opportunities, we must all continue to put the client at the centre of the process even if less costs are payable. We cannot dumb down the system too much or cut corners to save money where it means the client receives a poor service. I also see opportunity for us all to grow up and work together more. Let’s work together to cut fraud out as early as possible and to co-operate with each other on the straightforward cases and embrace the portal. We should all want to see genuine clients get their reasonable compensation as quickly as possible. Are ABSs the only opportunity / new business potential for the claims legal sector that some have purported it to be?

At present the SRA have licensed JV ABSs and say they are a compliant way to get around the referral fee ban and obtain income - so we shall see how they work. My concern is that they are new, untested and I wonder how profitable they will be. I also worry about conflict. It has always concerned me with the ABS model because as independent lawyers, our Code and our regulator say we must put client first and not be conflicted when acting for them. I worry that in an ABS model, there is huge potential for conflict where the business side of the ABS wants to do something to save money or cut overheads but that would have a detriment effect on the client or would breach OFR. Who wins that fight? We shall have to wait and see.

Does legal services outsourcing provide a more effective, efficient model for insurers than BPOs / partnerships /ABSs, and why?

Yes I think it does. I have said that Insurers need to look at more than income on claims post LASPO with the ban on referral fees. They need to look at what they can ‘save’ too. Outsourcing to a professional business can be very effective and economic for Insurers. They have legacy IT systems and they only do their own work. The company they outsource to should be dynamic, flexible, quality and competitive. They should offer them more. For example, much better IT, less work for them to do and, obviously, a huge financial saving too. If the work is done even better, it improves their brand and their offering to clients. The major issue though is that who they outsource to must be excellent to protect their very important brands. It must be a partnership. Finally, how will Carpenters Law succeed where others might not in the future?

As I said before, we have been successful for a number of reasons and we must not forget them in the new world. We have been innovative and offer more than just traditional legal services and we must build on that. The firm must continue to provide a quality personal service because that is our USP and we must also continue with our ethical approach to what we do and how we do it. We have always reinvested heavily in the firm and invested in good staff and IT. We will continue to do that. Whilst some people might pick up work and turn heads with pound signs and new models, we must stand our ground and be there if these new models fall over and fail to look after customers well. Donna Scully, Carpenters

MC // May 2013

Features

Telematic-based opportunities Telematics technology has been proven to help reduce speeding and unsafe driving styles in the commercial fleet sector, thus reducing accidents and injuries on our roads. The kit is fast-becoming mainstream with motorists as insurers recognise the advantages of telematics-based insurance, as Andy Kirk explains.

n light of the reductions in insurance premiums that come along with the ‘little black box’, it is hardly surprising young drivers are flocking to take up telematics-based policies. Parents are also increasingly interested as they can extend the protection offered to their loved ones, especially in the formative years of their driving careers. Insurance companies can offer the reduced premiums because the technology will effectively assist in reducing risk. It can monitor driving styles, harsh acceleration, harsh braking, excessive speeding as well as providing g-force monitoring and automated crash and tamper alerts. Companies such as Quartix are leading the way in this sector, with many of the leading insurance companies already using their technology to underpin their telematics-based insurance policies. Engaging motorists But offering the technology alone is not enough – we have to offer a complete service from the moment the young driver chooses a policy on the web, through the installation, vehicle and document- checking process to the automated reporting for the insurer’s back office. It has to come with complete peace of mind that the whole process works as the consumer would expect – indeed it is the insurer’s brand which is at stake. Some insurers require a very comprehensive reporting service with management information and automated dashboards; others simply require driver scoring reports and a simple traffic light system to detect the riskiest of drivers. Quartix is working on many large projects with Wunelli, a telematics solutions provider offering software and data analysis to some of the UK’s leading insurance companies. It is not just about young drivers, the technology being rolled out to drivers of all ages. We are about to launch a telematics product for Insured Cars Online aimed at people leasing new cars where they

“The companies that will succeed in this sector are those that own the IPR to the technology and can offer an end to end managed service. Only these will be able to offer the level of bespoke service that insurers and data specialists require” MC // May 2013

Features

Graph showing the distribution of driving styles in a typical commercial fleet using the Quartix driving-style index. This method makes identifying the high risk policies very easy indeed. simply ‘fuel and go’ – with all the insurance, servicing and tax are taken care of. The insurance aspect of this offering uses Quartix insurance telematics linked to one of the UK’s largest independent insurance brokers. The companies that will succeed in this sector are those that own the IPR to the technology and can offer an end to end managed service. Only these will be able to offer the level of bespoke service that insurers and data specialists require. In addition, their business models will have to be scalable to cope with the volumes anticipated. At present, there aren’t many UK companies that can offer this level of service. Quartix maintains complete ownership and control of its vehicle tracking technology, from the vehicle terminal through to the tracking system servers and databases, which ensures we are flexible and reliable. On top of that, the unit is designed and assembled in the UK. Andy Kirk is the Director of Quartix

“It has to come with complete peace of mind that the whole process works as the consumer would expect – indeed it is the insurer’s brand which is at stake” MC // May 2013

Telematics: an introduction Driving-style monitoring – Using a combination of GPS data and the sensitive “black box” style monitoring built into the Quartix Telematics device, rapid acceleration and braking can be accurately recorded and processed. The management information is provided in simple and easy-to-read graphical reports. Unlike other driving analysis systems, the Quartix Driving-Style feature is not connected to the vehicle’s CAN-Bus. This allows reliable driver comparisons across all vehicle types, makes and models. It also means the system is remotely configurable, does not need vehicle manufacturers’ approvals, comes at no additional cost and can be used on new and old vehicles alike. Crash detection, recording and real-time alerts – the Quartix TCSV10 detects and alerts when the vehicle is involved in a crash and records, at a rate of 8 samples per second, the events of the five seconds prior to and following the accident. The Quartix system incorporates a tri-axis accelerometer for this which monitors for any impact greater than 1.3g. In the event of an accident it alerts the allocated contact by text message and dedicated web services or email. Safe Speed Database – This is a unique tool that has been developed in order to provide fleet managers a far more relevant and accurate assessment of the risk profile of each driver. Using data from more than 40,000 commercial vehicles across 15.7million road segments in the UK, it maps each driver’s speed against the speed of other commercial road users for the same stretch of road. This may be viewed against each data point, or averaged over periods of a week or month. It is statistically proven that accident risk increases exponentially as speed increases from the median speed of other road users – so we believe this to be a much more important indicator of risk in the field than just comparing speed with the speed limit, which can be inaccurate for various reasons.

Feature

An affinity for quality partnerships The last 12 months have certainly been history in the making for the professional services sector with the advent of ABS. With legal and RDR being the key focus for most of the financial sector, it has been a challenging but interesting time for all professional service stakeholders concerned. Michael Davidson reports.

egal services are clearly on a journey of both improved/ greater access and transparency and alternative business structures will no doubt continue to take many forms across the sector and bring with it a variety of investment opportunities and customer propositions. One thing has become clear in recent months for those operating in both B2B and B2C channels; customers are demanding wider access to legal services and in a substantially more customer friendly and focused manor. The use of technology will of course play a huge part in ensuring customers have the access that suits their individual needs and also help achieve improved client satisfaction and retention levels. Those who adopt and embrace technological methods quickly will certainly find the path of least resistance in growing their propositions. Both the regulatory changes within the legal sector and the aims of RDR have brought about remarkably similar outcomes. It is well documented that the key aims of RDR were to review and revise: 1. Advisor charging and fees 2. Increased professionalism and qualifications 3. Independence of advice Without doubt, the above has been challenging for a number of operators within the financial sector, mainly due to the timescales imposed by the then FSA and the number of changes required. However most have come through the challenge fitter and stronger with a more robust offering and overall customer proposition. The same changes are organically

happening within legal, with a move towards fixed costs across a number of legal areas. As is greater transparency in dealing with a client from the outset and certainly more focus on qualified individuals being readily available to customerâ&#x20AC;&#x2122;s demands, when they need it most. The legal market has been historically fragmented with firms outside the top 40 mainly offering specialist, niche legal services - with some operating within pure B2C distribution and others slightly hybrid across both B2B and B2C channels. However, it is astonishing that only a few firms in the UK have the capability to offer a genuine whole of legal market service and deliver this effectively 24/7, 365 days a year. A perfect affinity We are, after all, in 2013 where still the customer remains king! Plus, technology drives successful distribution and access across both B2C and B2B channels. The professional services market place iUKs closer now than it has ever been which has enabled the creation of unique affinity relationships to form. When recently asked to engineer a whole of market legal proposition embracing the principles of RDR for financial service intermediaries I was able to do so using my extensive service and product knowledge and experience of both the financial and legal sectors. Providing established financial operators the ability to offer their own legal brands - to both their membership advisors and enduser clients, is certainly appealing - especially when this unique whitewrapped offering provides a genuine whole of market access to legal advice on a real time 24/7 basis. A legal affinity offering that can honestly satisfy and compliment the principles aims of RDR is proving to be

critical in linking both legal and financial sectors together within a B2B framework. Historically legal and financial service linked propositions have been somewhat piecemeal and have focused on specialist legal and financial product-focused areas, with the main offerings being around: mortgages and conveyancing; wills and life policies; pensions and trusts. However, professional financial and mortgage advisors have quickly realised there is great value in being able to represent their clients and their families on a much wider scale and be able to help address their needs. Unique offerings Being able to recommend a client or a member of their family for any legal service they may require (which operates using the principles of RDR combined with the option of exclusive client discount or fixed referral fee income) is certainly unique. Some financial operators have reviewed options to provide legal services in-house, however liability issues, management and overheads for a whole of market affinity proposition of this scale and nature are substantial. They are best advised to seek the services of an established affinity partner who can provide a robust journey with minimal investment; minimal overheads and exceptional SLA and KPI delivery. Providing a whole of market legal affinity service, offering genuine 24/7, 365 days a year, initial free advice with face-to-face optional consultation anywhere in the UK - is not within the capabilities of the majority. Yet, with demand remaining high, the trend is set to continue for quality affinity partnerships within the UK for many years to come. Michael Davidson is Head of Strategy and Sales at Goldsmith Williams Solicitors.

MC // May 2013

Features

Interview with... Dominic Clayden Dominic Clayden, Aviva’s Director of Claims, speaks to Bippon Vinayak about controlling costs, fraud, settling fairly and quickly for clients and the effective use of medical reporting agencies.

As a major insurer where do you think the overriding objective is, to control costs and therefore translate that into reduced premiums? Or, is it to make sure that only genuine claims are progressed?

Fundamentally, insurance is about risk transfer and we shouldn’t forget that the vast majority of customers are absolutely genuine. The vast majority of people who have been injured as a result of negligence from our customers are genuine. One of my concerns is that the agenda and the debate focuses too much on what do we do for the minority who are committing fraud. Fraud, we need to recognise, is a crime. Leave aside the legal niceties; ultimately it’s not a victimless crime. It’s something where, unless controlled, will be factored into premiums and then paid by people who are genuine. But it shouldn’t dominate the conversation in isolation. As ever, it’s about balance and I see the job of claims is to pay genuine claims as fairly and quickly as possible. My focus at Aviva is clear. We screen and look at all claims, but the vast majority of claims we settle and we settle very fast. That’s the priority for both first party and third party; there’s no incentive to delay settlement. I think fraudulent claims are split into two camps. Increasingly we are seeing organised fraud and fraud rings as a growing and major issue so we treat those differently. We’ve got a separate team that deals with fraud rings - they’ve got their own unique features. Then there’s ‘general fraud’, ‘opportunistic fraud’, or ‘one-off fraud’. We don’t apply an absolutely rigorous screen on everything because you’ve got to look after the genuine people as well. That’s where we’ve got to strike the balance.

MC // May 2013

How important do you think it is to public awareness that Aviva and other insurers have stringent fraud screening, or is that not a goal?

It’s about protecting the many from the few. The vast majority of customers are genuine and it’s about getting the message out there to the small minority who think that insurance fraud is either not going to be detected or is victimless. It’s important that people understand the consequences but what we shouldn’t be doing is in any way scaring off genuine claims. We need to absolutely make sure that people don’t feel that they’re under pressure not to claim because the whole point of having an insurance policy is, if it goes wrong we’ll sort it.

In a recent paper Aviva outlined a model for the future where the fault insurer deals directly with the non-fault customer. In this paper, it is claimed the overall outcome for the customer is the same, whether they are represented or deal directly with the Third Party Insurer. I want to understand how Aviva have reached this conclusion. Also, Aviva ran the whiplash treatment pilot. How does that work within the Aviva Third Party Assistance service?

In a situation where one of our policy holders - one of our customers - has been negligent, we look to make contact with that third-party. We look to repair the car, provide a suitable hire car if they want one and let’s be really honest that helps us in terms of managing the overall spend. Cost is one of my frustrations, particularly in the car hire space. I think it’s ridiculous - the gap between the rate I can hire a car on and one I’m seeing in credit hire - and I’m hoping the Competition Commission

“The independent medical-reporting agencies are, with a little tweak, absolutely the best people to do that because I don’t see the alternative. A big government agency doing it isn’t going to do it”

Features

“I don’t believe having lawyers in those low value claims adds any real material value – the value can be delivered by going directly to the insurer so from an Aviva point of view, let the insurer have the first go at settling it” deal with this because from a legal point of view there’s a fundamental problem. The people contracting and organising the service aren’t the people who are going to pay for it. So we run third party capture and I think that works very well. In terms of the injury - if it’s what we regard a low value injury - we do offer the alternative of dealing without a lawyer, as well as saying they can. We make it clear for people and within that process we offer access to independent rehabilitation advice. I think it’s important to be really clear in what rehabilitation is - sometimes its clinical advice although it may not be hands on treatment. It’s about saying, this is a whiplash injury, this will resolve, keep mobile, take pain killers and if it doesn’t resolve go to your GP, or let’s get some treatment with physiotherapy then monitor through and its tailoring it to the individual. We make it clear that people can get legal advice if they want. We use Colossus - the mechanism we use whether people are represented or not - to understand what we believe the right compensation is. That involves feeding in parameters around the injury. I’m quite comfortable that we’re giving fair compensation, so if people want to go to their lawyer, that option is there. The other element to this answer is something I want to guard against - the very rare case where everybody thinks it’s a minor injury but it actually developed into something significantly worse. I am quite comfortable that those cases get reopened. I believe it’s from my experience the right way of treating low value claims. In represented cases, I don’t believe people talk to lawyers. The reality is that paralegals in law firms are pushing through a process. I don’t believe the legal costs serve the premium paying customers - the community’s interests need to be taken into account as well. I don’t believe having lawyers in those low value claims adds any real material value – the value can be delivered by going directly to the insurer so from an Aviva point of view, let the insurer have the first go at settling it. If the insurance company can’t or they delay, then I think there needs to be safeguards.

Do you offer a minimal level of medical assessment to all injured people you deal with directly? What is your position on the practice of settling cases without medical assessment?

It’s about treating each case individually. If there are any clinical issues, we will get a medical report. We use medical agencies. I think they add value from a process point of view within the system. On low value claims, a report is generally obtained from a GP and I think that’s right. I think the idea that you need a consultant to do that is, frankly, on whiplash, ridiculous. In the clinical world I don’t believe consultants see people with routine whiplash, it’s just not how the NHS works. Actually, the people who clinically see patients with whiplash more frequently are

GPs. I think medical reporting agencies have done a lot of good things in terms of getting an operational process to get medical reports and controlling costs.

The Government is currently consulting on the independence of medical evidence. Do you feel the current system is broken?

I think there is something in terms of, ‘do I believe there should be accreditation of doctors?’ Yes, but I don’t believe we should throw the baby out the bath water. We need to build on the medical reporting agency model, not scrap it. We want to make sure these are doctors who are absolutely independent, who understand the conditions they’re seeing and, frankly, that they’re going to give a straight down the middle, clinical view. Don’t be biased one way or the other, just give us the view of what you honestly think is wrong with this person. The independent medicalreporting agencies are, with a little tweak, absolutely the best people to do that because I don’t see the alternative. A big government agency doing it isn’t going to do it.

“One of my concerns is that the agenda and the debate focuses too much on what do we do for the minority who are committing fraud.”

In the Aviva paper, you also mention ‘care’ rather than ‘cash’. The paper states only 33% of the compensation is used on treatment. What percentage should be used on care?

Generally speaking, if the care is applied it reduces the claim costs. What that means is the person has got better quicker than they would have done, which - for people who have had an injury - that’s what they want. What we want is a doctor looking at these people and if they believe there’s treatment of whatever needed then their role as simply being the medical reporting doctor may not be the future. Does it change what a medical reporting agency does? Probably, but that’s okay. I don’t want to see somebody making a silly margin on it but I get depressed and frankly frustrated when I see people trying to make a turn on physiotherapy and medical treatment. That’s not what we should be doing - we don’t want to get into the same place in medical treatment that we’ve got to in credit hire. Modern Claims would like to thank Bippon Vinayak, Interview Editor of Modern Claims, Chairman and CEO, Doctors Chambers, for conducting this interview.

MC // May 2013

d ics hin at be em s. gy tel me olo in am hn ma gr ec â&#x20AC;&#x2122;s pro e t UK e Th h e a n c f t ur 6 o i ns

A little black number from Quartix

And some bigger numbers: 1,000,000,000 miles tracked / year 1,000,000 speed distribution datasets 80,000 installations 4,900 fleet customers 200 UK installers 8 acceleration samples per second 6 major insurance programmes

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enquiries@quartix.net

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Features

A flood of concern With the rising media and public concern over insurance policies against flood damage, Laurence Waterhouse asks, is the risk from climate change increasing for insurers, developers and property owners?

Knock-on effect How will climate change affect us here in the UK? Recent results with stateof-the-art climate models have raised the possibility that climate change may affect the jet stream more than scientists previously expected, making floods in the UK more likely. However, the uncertainty in these projections remains large. Flash flooding could also become more frequent as extreme rainfall events are consistently predicted to become more severe. Flood hazard is greatest in coastal surge conditions, especially where flood defences are breached rather than overtopped. Flood hazard is also high in ‘rapid response catchments’ such as areas with high impermeability urban developments, car parks, etc.. As the frequent torrential rain continues, it focuses minds on the risk that hundreds of thousands of properties could become

Flood warning: Pollutants are on the move, warns David Brierley.

uninsurable and thus unmortgageable – causing property prices to plunge. Insurance impact Even homes in locations that flood frequently can currently obtain buildings and contents cover as a result of an agreement - set to expire in June 2013. This is where insurers promise not to exclude or ‘redline’ at risk areas in return for increased government spend on more flood defences. But the Government has cut expenditure on defences and insurance companies have been hit by soaring claims. Now some of Britain’s biggest insurers are considering restricting cover in areas where the risk of flooding is greatest. Planning for the future Planning priorities and processes must be changed to reflect environmental reality. At present we’re seeing demand-driven development that will require ever-increasing flood defences and will result in misery for millions of householders and businesses - unless there is a new approach to flood risk and insurance cover. What is needed is environmentally responsible and equitable development planning across the UK. Most of our towns and cities have some flooding problems, but with careful design and in conjunction with planners and developers, these problems can be overcome. At the same time existing developments and businesses can benefit from flood protection schemes and mitigation.

Water is the ideal transporter of contamination when extreme weather conditions come into force. Last year, Hurricane Sandy sped fuel tanks along in its wake. In France, a storm aggravated the consequences of a fire at a fertilizer warehouse, polluting two rivers. Floods can rupture fuel storage facilities and pipelines, bringing pollutants to the surface, which remain there as waters subside, endangering people and the wider environment. In 2010, 1 million cubic metres of mining waste erupted over six Hungarian villages following the burst of a dam – resulting in four deaths, 120 injuries and 7,000 were affected. This was not a natural flooding issue but a ‘perfect model’ of what may happen when the climate is in charge. The Environmental Damage Regulations 2009 made habitats and species, as well as people and businesses, entitled to compensation in the event of a pollution incident – a financial nightmare. These risks are not fully covered through mainstream insurance but are insurable via the specialist environmental insurance market. UK businesses need to be informed that whilst there is a risk, there is also a solution. David Brierley is the Business Development Executive at Willis UK Retail www.willis.com

Laurence Waterhouse FRSA MCInstCES, is Associate Director at REC Flood Risk

MC // May 2013

1. climate-adapt.eea.europa.eu/

all it ‘climate change’ or ‘global warming’ - weather patterns seem to be changing and affecting how frequently flooding occurs in the UK. The effects of climate change will be so far-reaching across the continent that vineyards may have to plant new grape varieties, farmers may have to cultivate new crops and water suppliers look to technology - such as desalination - to cope with the probable effects of more extreme weather. Buildings and infrastructure such as transport, energy and communication networks will also have to be changed. The warnings come in a report from the European Environment Agency, called Adaptation in Europe1. The research found that half of the 32 member countries of the EEA still lack plans to adapt to the effects of global warming, although others have begun to take action. The EEA found that the effects of climate change are already being felt across Europe. There is now less rainfall in southern Europe where much of Europe’s agriculture is focused - and more rainfall in northern Europe, where it gives rise to floods.

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Features

Taking stock: APIL Annual Conference 2013 Modern Claims recently attended this year’s annual APIL (Association of Personal Injury Lawyers) conference held at the Celtic Manor Resort in Newport, South Wales. At a time of fundamental unrest within the claims sector, how will the new President of APIL, Matthew Stockwell, manage to take stock of the industry to face the changes head on? Charlotte Parkinson, Modern Claims, reports.

he face of the claims industry has changed beyond recognition in the last 12 months, with many PI lawyers having to change the face of the way they run their business. There is no doubt that it is a somewhat challenging time to take on the Presidential role at APIL, with so many people left wanting answers. Matthew Stockwell was clear to emphasise his genuine pleasure at taking on the position, despite admitting that many of the people offering words of kindness on his new inauguration as President: “felt it necessary to qualify their remarks – ‘It’s not a great time, rather you than me at the moment...’” clearly demonstrating he has taken up the role at a tricky time. A pivotal role So, having duly accepted and embarked on his new position, how does Matthew Stockwell plan to respond to this change and be the driving force of reason behind ‘the government’s rushed and ill-considered reforms’? Choosing to compare the developments, or lack of in the claims sector, by placing a focus on APIL ‘then and now’, Stockwell seemed to remain settled in his optimistic view that ‘personal injury lawyers have consistently made a difference... despite continual pressure’. He believes APIL has played a pivotal role in harnessing the collective strength of PI Lawyers. Yet his strong focus on some of what he calls ‘disturbing’ flaws of the recent Jackson Report and its implementation through the LASPO Act suggested otherwise.

“As an optimist, I recognise that personal injury lawyers have consistently made a difference to the lives of injured people despite continual pressure and that APIL has played a pivotal role in mobilising claimant PI lawyers and harnessing their collective strength” Regulating the regulators. During his conference address, Stockwell used two key anecdotes to illustrate this observation. He drew particular attention to the reality that ‘Sir Rupert failed to look beyond recovery of additional liabilities at the true drivers that influence the cost of litigation’. He went on to say that Jackson had chosen to ignore the fact that no constriction is placed on the well-resourced defendant spending unlimited funds and time on a particular case under the new regime. Stockwell later asked how making a claimant partially liable for costs as opposed the combined

influence of the paying party and the court in its case management and cost assessment roles could provide more effective control over expenditure? A fear of - what Stockwell called - ‘the wellresourced insurer’ emerged as he declared: “Insurers will waste no time trying to cut lawyers out of the system all together.” A sentiment later echoed by Karl Tonks, Immediate past President of APIL, during Matthew Stockwell, the one of the panel debates new President of APIL, when he highlighted that is committed to uniting claims to injured people claimant personal injury are going to be regulated lawyers in the face of by insurance companies, unprecedented change. but who will be regulating these? It was Sir Rupert’s objection to the losing defendant’s being exposed to success fees, however, which Stockwell is against - the idea of winners paying for losers. The future is bright... How then, has Stockwell considered adapting and tackling the seismic change that APIL and its members face? Clearly he sees keeping the needs of the injured person at heart as the necessary constant amongst the irregularity. “What’s important for us professionals is that we rise to meet the challenges, remembering that injured people are completely reliant on us in this regard,” he stressed - a point which was reiterated throughout the day. Noting the response which APIL is currently developing to the government’s most recent consultation on the discount rate, he was clear to point out how careful the consideration over this must be. “An attack on the discount rate would be one of the gravest injustices of all,” he said. Despite the inevitable focus on the developments since last year’s APIL conference, the new President was clearly keen to end by emphasising his confidence in APIL uniting against the adversity its members have been faced with. “Against this unhappy background we have no choice but to react positively, adapt and find new ways to continue serving the needs of injured people,” he said. How and when this vision will come into fruition remains to be seen; the jury is well and truly out.

MC // May 2013

Features

5 minutes with... Ashton West, Chief Executive of the Motor Insurance Bureau MIB Q: Has the industry changed drastically since you started working in it? A: Yes and that is probably a reflection of the time I have been working in it. If I mention that I can recall the days before desk top computers and when all telephones had wires attached you will have some idea. Q: What has been the key positive impact of change in your market? Or negative, if you’d rather A: Undoubtedly the impact of technology. It has enabled a greater range of products and services for the consumer, access to vast amounts of information in seconds and created endless opportunities for innovation.

We are now on the edge of this horizon where the gravitational pull from technology and data becomes inescapable and all consuming. The possibilities are incredibly exciting. Q: Did you plan to be in the profession? A: Did any of us? Like most people I didn’t spend my time at school dreaming of insurance but it has been an incredibly fulfilling journey and one I would recommend to all. Q: Who inspires you and why? A: Everyone who overcomes adversity to lead a fulfilling life. Otherwise it depends on the context. For example, in sport, Steve Redgrave. In business in general Richard Branson. In insurance both of the Chairmen of the MIB that I have had the pleasure to work with, Simon Machell ex-Aviva and Keith Morris Sabre have done so.

Q: Have you had / got a mentor. If so, what was the most valuable advice they gave to you? A: Not really but Ray Hill an expresident of the CII was a source of great encouragement. Sadly he is no longer with us. Probably the best advice I ever received was to work hard, deliver on promises and let your work speak for you. Q: If you weren’t in your current position, what would you be doing? A: An airline pilot so be thankful next time you board a plane. Ashton West joined the MIB as Chief Executive in 2003. He has been in the insurance industry for over 30 years, actively involved in claims and general management. He is also currently a Director of the Insurance Fraud Bureau and Insurance Database Services Ltd.

Welcome to the self-service future of law? L

aw firms, their clients and business partners are demanding more for less and require live information, fast, wherever they are. The new TouchPoint portal from Eclipse means firms can now access bespoke, real-time data, information and applications, via any device and any web browser. It is set to change the way legal businesses monitor value, performance, service delivery and marketing. Let’s look at how TouchPoint could be used by a business partner. Let’s call our individual user ‘James’. James is a senior director at an insurance company, and his job involves liaising with an external service provider who

MC // May 2013

manages large quantities of litigated injury cases. TouchPoint changes his interaction with this law firm partner, and how he tracks progress. The interactive hub behind TouchPoint gives him visibility of all current and historical claims, live visual statistics, and reporting tools. This means he can track work at a time and in a place convenient to him - be that in the office, or on an evening at home via iPad. He can keep an eye on costs and progress at the touch of a tile, ultimately helping James do his job more easily and deliver a better service to his clients and stakeholders.

quick turnaround. The self-service ‘Analytics’ helps James stay on top of his game to assess and compare data – drawing from a range of parameters, KPIs and management information,live, on-screen. TouchPoint’s ’Marketing’ tiles give James a window on what’s happening at his partner law firm, because he receives all kinds of tailored and useful communications through it. Finally, instead of waiting to receive a letter or phone call, James can tell his firm what he thinks of the service he receives using the TouchPoint ‘Client Satisfaction’ survey.

Instant business monitoring By accessing the ‘FileView’ tile, James can track each and every claim himself, whenever he wants, instantly. ‘SecureDocs’ in TouchPoint gives him online access to documents that need authorising or digitally signing for a

Working collaboratively at last? For James, that time has arrived. Darren Gower, Head of Marketing, Eclipse Legal Systems darren.gower@eclipselegal.co.uk, www.eclipselegal.co.uk

Created and delivered by subject matter experts, these ensure delegates leave with practical skills and ideas they can apply in the workplace.

As the professional body for the insurance sector, the CII offers a range of training courses to help claims practitioners enhance their knowledge and expertise.

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In total the CII offers more than 100 insurance face-to-face courses covering all core and many specialist disciplines and classes of insurance, including: Risk Management, Liability, Property, Energy, Marine and Underwriting.

Weâ&#x20AC;&#x2122;re rated 2012 delegate feedback: average rating across 4,664 courses

To find out more Visit: www.cii.co.uk/f2f Call: +44 (0)20 8989 8464

Personal Injury ABS? You need Proclaim.

The complete all-in-one software solution incorporating: H Claims Management H Personal Injury Litigation H Medical Reporting Case Management Software designed exclusively for Alternative Business Structures in the PI sector.

â&#x20AC;&#x153;Proclaim ABS PI is a unique solution. Any personal injury organisation wanting to survive and thrive must seriously consider adopting it.â&#x20AC;? James Maxey (Partner), Express Solicitors

For a free demonstration:

Call 01274 704100

info@eclipselegal.co.uk | www.eclipselegal.co.uk