Insurers are treading a fine line in claims handling
In the last few years a previously little known phenomenon, third party capture, has become an important part of the insurance industry without creating any headlines at all.
Third party capture is most often used in road traffic accidents, whereby the insurer for the party at fault will swiftly contact the non-fault third party before he or she has had time to go to a solicitors or anyone else, and deal with the claim on their behalf.
This has enabled insurers to cut out organisations such as Credit Hirers, Claimant Solicitors and non-approved repairers.
The success of any third party capture scheme is highly dependant upon the insurer having the capability to contact the third party and deal with their claim very swiftly.
This issue was raised recently at the Motor Accident Solicitors Society Annual Conference where Nick Gunter, Head of Technical Claims at Fortis Insurance, said that his company had captured and handled 1,600 claims without the involvement of any claimant solicitor, in the first 9 months of 2007.
However third party capture activities have raised eyebrows in some quarters. Unsurprisingly, Claimant Solicitors object and point to the risk of an inherent conflict of interest where the paying insurer is dealing with a claim on behalf of an unrepresented Claimant.
The activities of some insurers engaged in this field also look very much like the activities of claims management companies, but unlike claims management companies insurers in this area are not regulated by the Provisions of the Compensation Act. This is because the Ministry of Justice has taken the view that insurers carrying out third party capture come under the FSA Jurisdiction and further regulatory involvement would amount double regulation.
The FSA has called for evidence from those who object to third party capture schemes and has signified a willingness to take steps if there is any evidence suggesting impropriety on behalf of authorised firms.
The practice has lead to a sharp polarisation between those Solicitors and Credit Hirers who are prepared to step in and work with insurers under third party capture schemes and those who consider the whole notion completely unacceptable.
"I suspect that a lot depends on whether there are any high profile cases which emerge from all of this to highlight the risks of the practice," says Andrew Welch, Head of Insurance at Stephensons Solicitors.
"It almost undoubtedly makes economic sense for insurers to take a pro-active stance on dealing with claims against them, especially those of more modest value. However it doesn’t take much to imagine the furore which would ensue if insurers starting settling high value personal injury claims for less than they were worth, without encouraging the Claimant to seek independent advice and it also transpired that the insurer was receiving a referral fees or commission payments from the various organisations involved in those cases.
So far, third part capture has not attracted much public attention outside the industry. But that may change, and if it does, much will hinge on the systems that insurers have to show that they are appropriately settling cases and looking after Claimants.