Norwich Union's proposal to cut claimant legal advice will cut damages too, says Catherine Leech
' Once again Norwich Union (NU) has launched a scud missile at the existing personal injury claim system, aimed at claims management companies and solicitors.
It charges them with having "exploited claimant expectations" and, as a consequence, 40% of all compensation paid it describes as "frivolous and vexatious".
Such comments cannot go unchallenged.
The premise on which NU presented its lawyer-free alternative for handling personal injury cases appears to be flawed and certainly at odds with the recent Better Regulation Task Force report, Datamonitor report and statistics coming out of the Department of Work and Pensions.
NU has chosen to refer to reputable surveys in passing, presumably because they show unequivocally that there is no massive increase in the number of claims being presented.
There is certainly no objective evidence in the public domain to show that 40% of claimants are frivolous, vexatious or by implication, fraudulent.
Quite why a respectable company should seek to present a picture that is seemingly inaccurate can only be explained when you look at the proposals that it suggests.
It suggests that the insurer should deal direct with the injured claimant without independent legal advice. And only if they cannot resolve the case should the matter proceed, perhaps to mediation. NU believes no legal costs should be payable routinely and that damages should be calculated on a "transparent basis", without defining this.
Our research suggests that at the outset of a case an insurer will still seek to offer claimants a low sum rather than its proper value.
Over two months late last year we reviewed 540 settlements . These were cases where the first offer was for a sum under £5,000, a figure that has been considered as the possible cut-off point for a "small claim" in other proposals. Presumably this is the sort of figure below which NU's lawyer-free system would operate.
Our research showed that only 26% of the first offers made by insurers were reasonable in the circumstances. No matter how transparent guidelines are, expecting a claimant to look at this without the benefit of specialist medical and legal advice is frankly unrealistic - yet this would be the effect of the NU way forward.
Over the 540 cases we looked at there was a total increase in excess of £451,000 from first offers to total settlement. This is just at one office over a six-week period.
The prospect of the first offer being accepted is much more likely if the person on the other side of the desk is the injured claimant and not his experienced legal representative.
Do not let the government be hoodwinked into believing the hype pedalled by NU that the present system is rotten to the core and that it is all the fault of the claimant and their representatives. IT
' Catherine Leech is a partner specialising in personal injury at law firm Pannone & Partners