The UK's personal injury compensation system is in urgent need of reform. It is complex, adversarial, slow and costly. It undervalues the importance of getting people better and back to work quickly.
It encourages fraudulent and frivolous claims, while short-changing the legitimate claimants it is designed to protect. This is why, in December last year, we issued Care and Compensation, our proposals for reform.
Our radical proposals aim to put the genuine claimant at the heart of a fast, fair and efficient compensation system. They challenge everyone involved in the system, including insurers, to recognise the need for change.
When a person makes a personal injury claim, they enter a process which is too slow, complex and adversarial. Our industry is part of a process which all too often fails to put the interests of genuine claimants first.
No one party is to blame for this, but it cannot be right that:
Our call for change is motivated by a desire to improve the service provided to genuine claimants.
Our proposals address the two key deficiencies in the system - making the compensation process quicker, simpler, fairer and more accessible, and encouraging and promoting greater use of rehabilitation and care.
Our aim is to cut the average time taken to settle a personal injury claim to just six months, through a fast-track procedure, enabling anyone making a claim for under £25,000 (90% of all personal injury claims) to seek compensation without having to go through a long and costly legal process.
Under our proposals:
It is clear that these proposals set challenges for insurers, with faster limits for settling claims, arbitration, and financial penalties if they get it wrong.
Our research shows that the burden of unnecessary legal costs is often particularly high for smaller claims, despite the fact that there is frequently no dispute about liability or the right level of compensation.
The Lord Chancellor has reported some cases involving compensation of less than £2,000 that have incurred claimant costs of between £4,500 and £7,000.
Our fast track compensation proposals aim to reduce these costs by making it easier and quicker for insurers to settle simple straightforward claims without the need for legal advice.
We also propose raising the small claims track limit for personal injury claims from £1,000 to £5,000. This would bring it in line with the majority of other claims and remove substantial costs for a large number of relatively low value claims.
The current system encourages a 'have a go' attitude. Too much time is spent dealing with exaggerated and frivolous claims, at the expense of genuine and deserving claimants.
So the ABI proposes that the courts should have the powers to reduce or dismiss a claim when they find evidence that it is exaggerated or frivolous.
Hand-in-hand with our proposals for compensation reform goes the need to improve the UK's poor record on occupational health. This means disadvantage, social exclusion and poor health outcomes for those unable to work.
It also leads to high benefit bills for government and lost competitiveness for the UK economy - in 2004, 28 million working days were lost due to workplace illness.
The complex, adversarial compensation process hampers timely access to rehabilitation. Too often too little care arrives too late. Yet helping people recover to full health should be an integral part of the compensation process - payment of compensation should not be at the expense of health care.
In recent years insurers have led the way in developing innovative policies, sometimes delivering rehabilitation regardless of liability. Employers that have grasped the issue have seen dramatic improvements in sickness and absence rates.
But more needs to be done. At present rehabilitation is delivered despite the current system, not helped by it. Our proposals aim to reverse this through:
Tax credit
The tax system should encourage rehabilitation. A new rehabilitation tax credit should be established to encourage and reward employers who provide rehabilitation services to their staff.
Rehabilitation benefits provided to staff should no longer be treated as a taxable benefit for employees, and should also qualify for tax relief for employers.
The ABI will launch a new Best Practice Code for responding to accidents and ill health in the workplace. Working with employer groups and trade unions, we will work to spread this best practice across the country.
Insurers will be working closely with employers to develop more insurance products to promote rehabilitation.
The government needs to ensure that the National Health Service, Health and Safety Executive, and benefits system support a return to work culture and promote rehabilitation.
Our proposals aim to stimulate debate and develop a consensus on the need for reform. They build on the government's Compensation Bill, whose modest provisions will only work if they are part of a much more comprehensive programme of reform. They align with the government's proposals, such as the NHS Redress Bill.
The insurance industry stands ready and willing to play its part in delivering much-needed reform to ensure that we have a compensation system fit for the demands of the twenty first century. We call on all other stakeholders to join us. IT
' Nick Starling is director of general insurance at the ABI
