Independent auditor to examine long-tail litigation bills

The Department for Work and Pensions (DWP) is awaiting the results of two crucial studies which have been commissioned by the ABI before it releases its second report into the problems facing the UK employers' liability (EL) market.

ABI head of general insurance John Parker, said that government timing on the release of its second report, which will consider in more detail some of the longer-term issues raised in the DWP's first report, which was released in June, was flexible.

"They would want to see the results of this work before publishing their own," Parker said. He said the two ABI studies, into the separation of long tail disease claims from accident claims and into legal costs, would be concluded in the autumn.

Parker said that with regards to long-tail disease claims, the government was looking for industry to prove that the problems with long-tail claims extended beyond asbestos exposures.

He said that the DWP also wanted data to illustrate that greater economic efficiency would be achieved by separating long-tail claims.

In order to provide the government with this evidence, the ABI has commissioned PricewaterhouseCoopers (PWC) to do an independent study, which is currently underway. "We thought it was important to have an independent body do it," Parker said.

In its first report, the DWP also raised the issue of legal costs, and in particular, of finding faster and more cost effective methods of dispute resolution. Parker said that the ABI had commissioned B&W Deloitte to provide a breakdown of legal costs, such as the amount spent by claimants, defendants and the cost of expert witnesses in order to give a better understanding of where the money went and highlight potential areas for reform. "We need to think radically about this rather than just tinkering around the edges," Parker said.

Another issue to be highlighted in the DWP's first report was the need for rehabilitation to play a more central role in the EL system. Parker said that while the ABI was not doing any specific work in this area, it believed a national action plan should be developed with short term and long term aims.