But long-term view suggests potential savings between 10% and 20% of indemnity spend

The insurance industry will have to spend £100m to meet the Ministry of Justice’s new deadlines for dealing with motor claims, according to an expert.

The reforms, due to be implemented in April 2010, will reduce the timeframe for liability decisions on RTA claims from three months to 15 days.

Tim Roberts, director of consultancy Parabis, said: “To change the culture of the staff and improve the processes to make [a firm] MoJ compliant would probably require one to two years of investment. It is probably going to be in the region of £100m for the industry.”

Insurers could benefit from longer term savings, however: between 10% and 20% of indemnity spend in the long run, Roberts added.

“The savings those insurers would make in comparison with that investment are massive,” he said.

AXA claims director David Williams said insurers needed to take a long-term view when assessing these investment costs.

“A lot of insurers are worried it will cost them more money to help them meet the deadline. I disagree. I can see how it could if you set yourselves up wrongly. But if you set yourself up more efficiently, you shouldn’t be doing additional work.”

He added: “There might be some initial set-up costs. You might need to change processes and structures. But it should reduce costs overall.”

Meanwhile, the MoJ and the ABI have approached Insurance Database Services Ltd (IDSL) to put out a tender for the construction for an industry web portal that will help insurers meet the new, tighter deadline.

IDSL chief executive Frazer Fundell confirmed that the company had received 15 applications by the tender’s deadline last week. The candidates are believed to include IBM.

“The MoJ has facilitated creating a new or revised approach to the set of protocols for the interface between plaintiffs’ lawyers and insurers, to encourage the ability to speed up the process and reduce costs. IDSL is implementing an electronic approach to handling that revised process,” Fundell said.

He added that a shortlist was pending. “We are reviewing those responses and expect to talk with shortlisted technology partners over the next few weeks.”

But Roberts argued that the success of the project would depend on whether it was compulsory for claimant solicitors.

“It is going to have to be mandated that it has to be used in order for the cost benefit to come out of it,” he warned.