Despite the reforms to civil procedures, Hugh Price says that insurers are still struggling to reduce the spiralling costs of personal injury claims
“I get that terrible sense of déjà vu,” says Hugh Price, a partner at Hugh James Solicitors, at the Insurance Times Future of Personal Injury Claims Conference, “because Lord Woolf carried out a huge exercise to identify the problems with litigation and claims in the 1990s.
“He concluded that the big problem with litigation was that it was too expensive, too slow, too adversarial, too uncertain and too complex.”
Lord Woolf brought in the Civil Procedure Rules (CPR).
“I think it is right to say there are aspects of the CPR that have benefited the industry, such as the personal injury protocol,” Price says.
“To some extent that developed front loading – the extra cost – but the protocols generally have worked. Part 36, for example, allows early offers to settle and gives case management to the courts, which reduces lingering claims that can last years.
“Unhappily, around the same time, legal aid for personal injury was withdrawn.” This, he says, has lead to some unforeseen circumstances.
The first is the rise of the claims farmer, a specialist financed by referral fees from lawyers. They are the beneficiaries of the government’s support of the conditional fee agreements (CFA) with its ‘no win, no fee’ stipulation.
“If there has been no investigation by the claimant lawyer, what has the insurer got to investigate?
Hugh Price, solicitor
Then came the big success fees and after-the-event premiums payable by the loser.
“These resulted in more expense to insurers, and insurers had to do something about it. They were losing revenue from investment and incurring underwriting losses that were no longer masked by revenue from investment,” says Price.
The ABI recommends that lawyers be taken out of the process wherever possible as there is already too much duplication and delay.
“The Ministry of Justice draft proposals are that the small claims limit should remain at £1,000 and the fast track should go up to £25,000. But my experience of district judges and county courts is that this has already happened.
“Most judges ask if there are any difficult issues and if there aren’t the case will be fast tracked regardless of the value of the claim.”
The other recommendation is early notification to the insurer. Price comments: “I have been an insurance lawyer for over 25 years and my concern is that if there is no investigation carried out by the claimant lawyer, what has the insurer got to investigate? If he does not know what the allegations are, how can he investigate it properly?
“So there is no CFA filter where the claimant party says ‘I am not going to take on a case unless I am pretty sure I am going to win it’. If there is no incentive for the lawyer to carry out that process, are we going to end up flooding the insurance industry with spurious claims that have had no investigation carried out?”