With the Royal London Hospital aiming to reduce its costs by encouraging the emergence of a US-style claims culture, British insurers should beware.

It began innocuously enough on the London Underground. While held up for the traditional ten minutes on my southbound trip to Waterloo from an appointment at Lloyd's, I was impressed by two young ladies who came into the tube carriage, sat down, and one immediately began conversing with the lady (an apparent stranger) who was sitting next to her. This unreservedness struck me as being quite un-English, and at odds with her fellow travellers, who, in good British fashion were stonily lost in their own world.It immediately occurred to me that she was probably American. Americans tend to be naturally loquacious, particularly when in the company of people who aren't. To my surprise, when I entered the conversation, the young woman was British, but somehow seemed under an American influence. Being American and brashly inquisitive, I had no hesitation in responding to her desire to chat and discovered indeed that she had spent quite some time working in my home town of New York.That same day, scanning through the Evening Standard, I learned about the recent actions of the Royal London Hospital in Whitechapel. The parallels were not lost on me.The hospital has taken an unprecedented step that undoubtedly will be a watershed in the British insurance claims industry and very much enters the realm of the great American Claims Machine.

Vultures circlingCourt Street in Brooklyn, New York, is known to be a home of personal injury claims attorneys. The term Court Street Lawyer, deemed rather derogatory in New York, masks the fact that attorneys who have their offices there are very often in the upper level of legal economic classes. It is said that were you to slip and fall on Court Street your major injury would be caused by the avalanche of attorney's business cards striking you, thrown from the windows of buildings that line the streets. It does emphasise the fact that New York is known for its myriad personal injury insurance claims.The UK, on the other hand, is a revelation to the New York lawyer. The general public is not only non-litigious but appears, even after being injured in a "liability" situation, to shrink away from making the contacts that litigation requires. This is much like the people who were in the Underground carriage that day. Stony stoicism is the response to an accident just as it is when a total stranger seeks conversation. Interestingly this lack of litigation temperament is often not mirrored by the individual's reaction to a libellous tabloid. In that case, solicitors are consulted.Of course, every reader will know that the contingency fee regime in the UK has spawned a plethora of litigation claims handlers (if you watch the television you cannot escape the adverts), but the fact is, large though the current market may be, the average person in Britain does not proactively seek a solicitor when an injury befalls them.In the event, the Royal London Hospital has decided to change the minds of the British people and the devil take the consequences. The situation revolves around the government scheme for NHS hospitals that permits them to claim and recoup a portion of monies expended in treating victims of accidents. The incongruity is that the monies can be claimed only if the victim/patient who has been treated actually makes a claim. Imagine then, that the hospital expends £20,000 in treating a seriously injured person. That person, liability aside, does not make a claim. The hospital cannot then recoup any of its expenses in treating the victim under the NHS. The Royal London has remedied this apparent problem.The Whitechapel hospital has entered into an agreement with a claims service. This service will pay the salary of a clerk to be present in the hospital to speak to victims of accidents. Presumably, the clerk is not being paid simply to commiserate, but rather to initiate claims.In New York, when an attorney is retained on a personal injury case (cases which are taken strictly on contingency), he must file a "retainer statement" with the governing body for lawyers. This statement indicates where the client came from, how the lawyer received the case (recommendation or otherwise) and the elements of the contingency retainer (whether a "sliding scale" or straight one-third). This system is the result of stringent regulation after investigations by various commissions. It seeks to prevent abuses, similar to those that might occur as a result of the Royal London decision. These abuses by and large can be classified by the term "ambulance chasing". The result in the short term will probably be an immediate upturn of claims numbers (at a high level any way) for which the personal injury part of the insurance industry is unprepared. The claims will begin as those emanating from automobile accidents. They will then escalate to medical negligence and a demand by the public for just compensation for horrific medical mistakes, which will spur higher verdicts. This, in turn, will spiral professional insurance rates, which will sooner or later be passed on to the consumer. There undoubtedly will be regulation of the legal industry as human nature will breed abuse.

Beginning of the endIn New York the existence of "medical mills", turning out medical reports which seek to increase compensation arising out of the "seriousness" of injuries, are constantly being discovered and prosecuted. There is no reason to believe that the adoption of American claim making mores will in any way be avoided by a British society which has been hungering for just such an opportunity. The mere fact that the Whitechapel innovation was, in fact, referred to as "ambulance chasing" by the news media is clearly proof of this fact.In sum, therefore, this completely legitimate move by the Royal London Hospital, is indicative of the government's failure to anticipate the massive changes that this plan could initiate. The Americanisation of the British claims system is just a matter of time. The learning point I would ask you to consider is that, to date, Britain has experienced a claims culture spawned by aggressive selling by litigation claims handlers. The hospital in this case has taken it to the next stage in that the public are being encouraged (where appropriate of course) to make a claim by an institution held in high regard. The next stage is Armageddon for the insurance industry - when the general public does not need to be encouraged but claims as a matter of course. Which leads me to a staggering thought. If it can happen in the medical industry, might we not see the same situation arising every time an insurer rejects or reduces a claim. Imagine the introduction: "Hello Mrs Jones, I'm from Unpaid Claims Direct. Fancy suing your broker? Won't cost you a penny."Roger Rubin is an attorney and University Professor of Law in New York. He will be conducting a series of lectures in the UK in early 2004. For those interested in extending their CPD knowledge we will supply details of the programme as soon as we have details. This page is edited by RW Associates, specialists in training, compliance and competence. Email: ruy.lopez@brokercompliance.co.uk

Using this CPD pageFor the vast majority of practitioners and indeed support and supervisory staff in our industry, CPD is about regular learning and study that is planned, recorded, timed and evaluated. If you are a member of a professional body with a CPD requirement then there will be certain rules regarding the quality and nature of study material, and the way in which it is recorded.For staff of GISC members this means recording on your individual training file what the learning was, who provided it and when.It might be structured, such as a course, a learning programme or exam study. But it can be unstructured. This form of study encompasses reading the trade press, technical material or taking part in activities to support your professional body. Some CPD requirements are points related (a little antiquated) and others require a time value to be allocated. For example, it might take one hour to read Insurance Times each week. Most of that could be put as a time value but, in reality, perhaps only an half hour was devoted to learning something. The rule is to be honest with yourself and record the time that is relevant. Always take time to make a note of what you felt you gained from the activity. This is useful information for anyone else considering the same activity.In response to the popularity of our CPD programme each week's CPD page can now be downloaded from our website. We will be preparing a binder for you to keep these in alongside the results of the exercises.To download a PDF of this article as it appears in the magazine click here