Insurers and claimant solicitors both want to cut costs, so why not try electronic arbitration to settle personal injury claims faster? Nick Addyman and Jason Powell explain how it might work.
Whether you are happy with the personal injury reforms or not, you have to admit that all the lobbying and cajoling has revealed that some things simply are not worth arguing about.
In personal injury that means rear-end shunts and whiplash. So while the Ministry of Justice toyed with its proposals, firms on either side of the fence got on with building efficiency into their personal injury procedures. Now it is time for the next step.
Insurers and law firms that want to be ready to deal in fast-track personal injury claims at a macro level will need businesses that are fit for purpose. However, while there is strong evidence that the faster you pay claims, the more benefit for all, a number of barriers need to be overcome first.
The current cumbersome personal injury claims process is the result of an adversarial system in which claimants posture in the name of getting the best deal and insurers are accused of delaying tactics or withholding data about how they calculate the value of a claim.
Typically, claimant solicitors must request a handwritten medical report, have this approved by their client and then submit that to the insurance company. Data is keyed in by the insurance claims’ handler, either into the CSC system Colossus or ISO’s Claims Outcome Advisor (COA), which produce a valuation.
This requires a manual review of written material by at least three separate parties and the manual input of data. Most insurance companies use one of these two systems. None uses both – and the claimant has no access to either so he or she can understand how a figure is arrived at.
An unwritten tariff system exists for general damages anyway, so what if it were possible to create a link from a doctor using report-writing software and marrying it electronically with the injury codes within the valuation tools of Colossus and COA?
Ostensibly, treatments and prognosis data could be taken electronically into a valuation tool. As long as the calibration in that tool is based purely on the medical data, none of the parties can throw stones at each other about the use of a medical report.
Second, a simple, open application would enable the parties – from doctor, claimant solicitor and insurer – to apply agreed rules around how they use that data to set up the process for settling the claim. How the parties position themselves once the application is live would remain their own business but, for straightforward motor personal injury cases, the process would be more efficient.
No one underestimates how electronic arbitration will require both cultural and business changes. For one thing, general damages for pain, suffering and loss of amenity are not the sole compensation to consider.
For general damages, the insurer and claimant need to agree a method for valuing the claim which, as explained earlier, can be done through an electronic link to the insurer’s valuation tool.
Second, special damages require negotiation up front in order to allow parties to agree on what elements – financial loss, for example – can be awarded without evidence. Such an agreement would not be dissimilar to a contract for delegated authority up to a certain amount.
But higher volumes could be transacted once the parties have agreed parameters for damages and a process for assigning liability.
The protection of vested interests always has to be challenged and all three parties in this mix may believe they have valid concerns.
Doctors may be reticent about being herded on to a single software platform against their will. As leaders of this process, medical agencies should help convince them of the benefits and reassure them that their opinions will not be undermined.
The struggle for insurers will be in seeing the value of moving towards an electronic settlement system that allows their valuation engines to be accessed by the claimant solicitor. Rather than labouring the point about process efficiency, perhaps insurers should consider the potential that this approach has of settling with unrepresented third parties.
The Association of Personal Injury Lawyers has lobbied extensively about the ethical position of dealing with unrepresented third parties, but an accepted valuation engine and an accepted arbitration system could temper these concerns – and those of the FSA, which is currently seeking evidence that insurers are treating third parties fairly.
For the claimant, control remains fundamental. The process must allow them to dip in and out, in the knowledge that not every claim should be settled by electronic arbitration and that negotiation remains an option. However, with claimant firms paying substantial sums to acquire claims in the first place, the means to process them in high volume at minimal cost has to be worth investigating.
Nick Addyman is a partner at Rymills Solicitors. Jason Powell is chief executive of Premier Medical Group.