The Groupama-sponsored Insurance Times young professionals advisory board discusses the Arculus Report and the compensation culture
Elliot Lane, chair - Insurance Times
Allan Clare - NFU Mutual
John Simpson - Aon
Julian Edwards - MCE
Kerry Costello - Groupama
David Curry - Miller
Clair Hayward - Mansion House ConsultantsChair: The conclusions from the Arculus Report were seen as positive, though the practicality of them has yet to be discussed fully. Today's debate will give us a feel of how practical the proposals really are. I want to open up by going round the table to find out what you all feel about the compensation culture and what you think the industry could do to tackle it or what it should do to tackle it. Julian Edwards: The culture of blame per claim is appalling. It's obviously led by the US, and is reaching epidemic levels. It's costing the insurance profession millions of pounds, particularly in personal lines with whiplash claims. It's almost seen as a bonus if someone drives into the back of you. I believe that each and every one of us is responsible for our own actions, and our own safety, to a certain degree. What can the insurance profession do to help rehabilitation? Companies could be more proactive in managing frequent illnesses to make sure that they don't become serious, such as emotional breakdowns. Kerry Costello: In terms of compensation culture, I was quite interested to read the Better Regulation Taskforce report, and its argument that actually it could be a myth rather than a reality. When you look at the figures, the actual number of cases in the last few years has dropped. There's a lot of media fuelling of the fact that there is a compensation culture. The story is you can get money for someone else's negligence, but when you read some of the background, people should be taking more responsibility for their own actions. Risk management comes in there as well. In terms of what the insurance industry can do, we should move away from focusing on the cash reward and instead focus on getting you back into the state that you were before, which is essentially what insurance is for.David Curry: There is this danger that there's this whole myth of the claims cost rising. I wouldn't say it's completely down to the media, it's down to a number of things. As you say, individuals might exaggerate stories about how much they've been able to get claims settled for, and then it's word of mouth. It spreads and then balloons. As Julian said, it can get to epidemic levels. The report seems to indicate that the compensation culture is nowhere near the US level, but if it's not controlled in some way, then it could be in the future. I don't want to speak for all claims management companies, but when I'm ill off work and I have the pleasure of daytime television, you have about five or six no-win, no-fee companies advertising 'Come on, come on, get what you can'. And certainly the report makes mention of one particular advertisement that was in a hospital saying: "Get your doctor or your nurse, they must have mistreated you in some way". It's just tacky. And in a way it does have a negative effect on the image of the insurance industry because people tend to link all these things together, which is dangerous. A colleague of mine has spent a lot of time in the Irish market and said that it's approaching the levels of litigation of the US and apparently it is getting out of control. He said that in Ireland, where the no-win, no-fee claims management companies are rife, the government made it law that if they lost the case, they would pay the other side's legal costs. That stopped it dead in its tracks. The ABI should start advertising itself in schools, hospitals and local authorities, providing risk management advice for personal injuries, getting people back to work as soon as possible.Chair: You feel that the ABI isn't taking this issue seriously?Curry: I just don't think the ABI projects itself enough. They've got a great name, but you don't hear from them enough. More action is needed.John Simpson: The report was well written, easy to read, and it tried to expel a few myths about the compensation culture. I'm not entirely convinced that there is enough evidence to say that what this report suggests, that things aren't as bad as they seem, is actually true. The Woolf Reforms and other fast-tracking issues are allowing more and more cases to be settled out of court, and I think that's skewing the figures. Most clients would still say that their employers' liability (EL) premiums are going up. Most clients would say that they're shocked at the amount of money that's being paid out on EL claims. I'm not sure how deeply this report goes into those additional factors – those claims that are settled out of court – and how much the report looks at the insurance industry statistics. In terms of who takes responsibility for a compensation culture, certainly the advertisements that we're talking about take a share of the blame. The one that shocked me particularly was the one in the hospital. These claims firms were advertising on the back of prescriptions and business cards of doctors, and that's just not the right way to go about sponsoring an NHS hospital. It is counter-productive. These claims companies have to bear some responsibility, but they're only acting within the law, they're not necessarily doing anything wrong. There are a couple of bits of legislation out there that don't help. One of the recommendations of the report was to increase the limit on personal injury on the small claims track from £1,000 to £5,000. My experience is that claims are deliberately not settled under £1,000, because when they are each side stands their own costs. So solicitors always look to get them settled over £1,000 because then they can claim costs from the other party. Raising the small claims limit to £5,000 might see people starting to fight more to keep claims above the £5,000 mark instead of £1,000. Insurers pay out quickly because they think it is reducing overall costs. It probably is in the short term, but in the long term fighting the right cases can pay dividends because you're introducing some precedents. Particularly in the case of unionised industries, once word gets around that a certain type of claim has been successfully defended, the unions will no longer support the actions. Allan Clare: I agree with quite a lot of what's been said already. I just want to focus on this myth and perception. If you go back to pre-Woolf Reforms, perhaps we weren't offering the compensation we should've been. People's education of what they were entitled to was lacking. It's like a pendulum, we're in one position and now we're going completely in the other way, and somehow it's got to come back. All stakeholders have a responsibility to bring us back to what is a right and proper, and just, claims environment. The insurance industry does have an obligation and a responsibility. It's a communication and an education issue. In the NHS, the government is looking at projects to redress the balance, but we are paying the money ultimately, so why isn't the insurance industry doing more? People are due money when accidents happen and responsibility is there. It's a case of giving them an expectation of when they are entitled to compensation and when they're not. All stakeholders, the GPs, the lawyers, the claimants, everybody's got to be aware of the reality. Chair: There are a number of companies that have jumped on the rehabilitation bandwagon. Would you recommend your clients to use one of these specialist organisations, or do you feel that it should be retained in-house? Clare: There are companies that add value. That's the bottom line, we want to add value. Primarily we want to ensure that the client gets better, and quickly, not just for us as a cost issue, but for a human issue. Insurance is all about people and insurance is there to pick up the problems. There are companies that can add value. Where they can and do add value we should all be considering using them. The difficulty is that it's such a new evolving area that there aren't in place the protocols, the procedures, the recognition, the accreditation and other issues so that you know which is the right company. Sometimes it's only through experience that you can identify which is the right company.But insurers primarily have an obliga-tion to deal with things, in-house or otherwise, and use the resources available to add best value.