Following the government’s legal reforms in motor on the personal injury discount rate, Insurance Times asks the industry what the unintended consequences might be

Donna Scully – director, Carpenters Group

“The fight against fraud is going to be the biggest casualty of the reforms, which is cruelly ironic given that the original purpose was to reduce fraudulent claims. A frictionless process with fewer checks and without the scrutiny of professionals in most claims has all the ingredients for more, not less fraud. You only have to read the recent financial statements from hire and claims management companies to see that they believe they will be the biggest beneficiaries of the reforms. Perhaps this was always intended, but the result will be that many customers are left at the mercy of the greedy claims farmers.

Donna Scully

Donna Scully, Carpenters Group

”The insurance sector may well suffer some long-term reputational damage when, after implementation, premium paying customers involved in a disputed accident are left without or with poor representation. The demise of PPI, the effective deregulation of motor claims to £5000 and fact credit hire and McKenzie Friends not covered by new FCA Regulation is likely to create the perfect storm for gaming and abuse.

”Reform is needed, but the new process was conceived too hastily without full consideration of its impacts. It’s a real shame that the political pressures to deliver the reforms has led to an unwillingness to tackle some of its basic flaws.”

Matthew Maxwell Scott executive director, Association of Consumer Support Organisations (ACSO) 

”The government’s new portal for those seeking compensation after a road traffic collision is likely to have an immediate effect on the behaviour of insurers and claimant representatives.  

Matthew Maxwell Scott, ASCO

Matthew Maxwell-Scott, ACSO 

”For insurers, there will be an incentive to deny liability and dispute levels of payouts. This is assuming they respond to claims in the first place: although they must do this within 14 days of a claim being lodged, the Ministry of Justice admits there are no sanctions planned  for insurers who don’t. While it seems unlikely they would take this path, it is not impossible.  

”Meanwhile the claimant sector will adapt rapidly to the new landscape. As the PPI era showed us, most consumers choose to use claims management companies even when they can seek compensation independently. With personal injury claims, this is likely to be even more the case. Genuine litigants in person may end up being few and far between.”

Marcus Taylor, director of claims, Minster Law

 ”The government’s rationale for the legal reforms was specifically to reduce whiplash claims and save money. But the new portal being built instead threatens to create a horrible customer experience for all claimants with lower value injury claims (whiplash or otherwise). It’s almost as if the government wants to put people off making claims altogether.

Marcus Taylor Minister Law

Marcus Taylor, Minister Law 

 ”With implementation of the new portal only months away, minsters appear to finally be waking up to the inherent complexities of even minor RTA claims. Removing child claims and protected parties from the portal is an acceptance of how hard it can be to move even simple processes online. To fully access justice, injured people will need a portal that manages their mobility, rehabilitation, medical reports and dispute resolution. If insurers deny liability, the portal will kick them out to an as yet unknown ADR process to get a decision. Many people will inevitably have to go it alone, or sign up with a claims management company.

 ”Given the service provided to a distressed customer at point of claim is the responsibility of the insurer who took the payment for insuring that customer, who’s to say that public trust in insurance, which according to Consumer Intelligence has already dropped substantially from 75% in mid-2017 down to circa 68% in 2018, won’t suffer further significant falls as a result of these reforms?

 ”On the upstream side of customer journey, the FCA is now forcing the issue on dual pricing, but what about the downstream, or claims, side, especially as insurers cite claims performance as their USP? Could motor legal reform be the final nail in the coffin of customer loyalty?”

Kirsty McKno, chair, The CHO

”The government has made plain its desire to move civil justice online to save money and make claiming quicker and simpler. It is a laudable aim which we all share, but it risks significant customer detriment, because claiming for minor injuries and vehicle damage after a car accident is not as simple as ABC. The government has championed online justice on the basis that most injured people will be capable of accessing the portal and managing their own claim. I disagree. There are so many factors to take account of within each claim; the need to provide mobility to a non-fault customer, medical reports, rehabilitation, liability resolution, internet access, language and literacy issues.  Without advice, help or expertise (which customers receive for free today), injured customers risk being left out in the cold.

Kirsty McKno

Kirsty McKno, The CHO

”The lesson from the PPI scandal, a very much simpler process, where banks admitted liability upfront, was that most people who thought they may have had a claim were unwilling or unable to do it themselves, and gave up a proportion of their eventual compensation to a claims management company to do it for them. I have no issue with well-regulated, reputable CMCs helping customers out, but a conveyer belt approach ignores the fact that each and every claim is different. 

”Furthermore, I am concerned that if the client (or CMC) doesn’t understand the rules and concludes the claim on a final basis, there will be a possibility that they will be asked to pay for the services they have received, which would otherwise be paid for by the at fault insurer. And that goes for rehab as well. The rules need to be very carefully drafted to avoid that consequence, and it is not enough for the MoJ to merely state that credit hire is excluded.”