Insurers face major challenges if claims reform is to take place.
The government published its long-awaited proposals for reform of the personal injury claims process in the summer. Yet the issue of claims reform is far from over. The government’s reforms themselves raise serious challenges for the insurance industry. There is also the question of how to improve the efficiency of the claims process for claims falling outside the government’s reforms.
Despite promising a radical overhaul of the personal injury system, the government’s
final report offered little in the way of true reform: only low-value road traffic accident claims would get a new fast-track process, with the process for other personal injury claims left largely untouched.
The new process for motor claims under £10,000 sets a 15-day time limit for insurers to make a decision on liability. The proposals will also bring in a fixed recoverable legal costs regime, the details of which have yet to be determined.
Yet the proposed system is troubling some insurers who are concerned about their ability to meet the deadline set for low-value motor claims. The uncertainty around the fixed-cost regime is also an issue. Some top claims executives express fears that compensation costs may not even drop.
Insurers are therefore working hard to make their own processes more efficient, for both low-value motor claims and other personal injury claims. Over the past few years, major liability insurers such as AXA, RSA and Zurich have been doing this, with a range of initiatives. These have included agreeing working practice protocols with major claimant law firms to speed up the settlement process. Insurers, such as Zurich, are also becoming more aggressive in tackling excessive legal costs.
Insurers are looking to circumvent lawyers, cutting costs and getting claimants into rehabilitation quickly. This direct dealing with claimants – so-called third-party capture – is becoming a major focus for insurers.
There are calls from sections of the insurance industry, such as AXA, for some form of coordinated approach between insurers for dealing with personal injury claims falling outside the government’s reforms – within the bounds of competition law, of course. This will not be easy to achieve.
The challenge is to persuade claimants to deal direct with insurers. The insurance industry will refer to research commissioned by the ABI that found unrepresented claimants received more money from insurers than those with legal representation and their claims took on average three months less time to settle.
Nonetheless it will require a lot of PR work to make claimants feel comfortable without legal representation. The claimant lawyer association will fight hard against moves to cut its members out of the equation.
Political lobbying is vital. The industry is looking to get the Conservative party on side, given that it seems likely to win the next general election, in order to achieve wider reform. Demonstrating that the government’s reforms work for motor claims will also provide a powerful argument for expanding the new system to other types of personal injury claim.
• Direct dealing with claimants in order to circumvent lawyers will grow in importance.
• An industry-wide solution for handling non-motor claims should be explored.
• Continued lobbying of the government and opposition is vital.
• Demonstrating that the government’s proposals work will provide a powerful argument for wider reform