So Claims Direct has set aside £5m to silence disgruntled customers who were unable to reclaim their after-the-event (ATE) insurance because they took it out before April 1. But that is not the end of the story. The whole claims culture being built up around ATE needs addressing.
The Lord Chancellor has made clear that claimants must have free access to justice. That means the risk must rest on the insurance industry and its players.
At present a potential claimant approaches a solicitor (or claims company) and is immediately signed up to an ATE policy for several hundreds of pounds. In many cases the solicitor writes one letter, the third party admits liability and settles the claim for relatively small sums.
The problem then is that the ATE policy has to be added to costs. With even the most expensive solicitors struggling to rack up costs in such cases, this ATE premium represents more than the legal fees. This is adding to claims inflation.
The Federation of Insurance Lawyers (FIL) argues that nobody should take out an ATE policy until the case is contested. The ATE underwriter will then be able to underwrite each case based on the stated defence.
The problem for the claimant lawyers then is that they may have to drop the case and have no way of recovering their initial costs. There is a good argument that says they should take some of that risk.
A decent assessment of the merits of the case in advance would be no bad thing.
But back to Claims Direct. It maintains the individual claimant is prepared to pay something anyway. It said so to the Lord Chancellor before he introduced the current arrangements.
It is time all sides sat down together and sorted this out.