ILC ARTICLE

The Experts View on the Civil Liability Bill

6th December 2018

We are all aware of the hotly debated Civil Liability Bill legislation which seeks to amend and update the claims process for whiplash claims whilst making reforms to the setting of the personal injury discount rate.

But what’s the take on it’s from different industry insiders?  We’ve posed the question to a number of leading claims experts and will be sharing their answers with you over the coming weeks.

First up we have Donna Scully, Director at Carpenters Group

Originally from Dublin, Donna moved to the UK in 1985 and worked with various London law firms before joining Carpenters in 1997, where she set up its specialist Personal Injury department.   Carpenters are now one of the leading Legal & Insurance Service Providers to the UK Insurance & Broker Market. In her spare time, Donna actively supports numerous charities, enjoys Pilates and walking, and supporting her 18-year-old sport-loving twin boys.

Do you think the reforms will have the desired effect on reducing the cost of claims?

What the insurance sector may gain in reduced claimant legal costs and damages for injury, it is likely to lose in having to sort out premium paying customers left confused and demanding assistance by what to do following an accident.

Hundreds of thousands of motorists will still have accidents, many resulting in an injury and all requiring putting right financially.

With credit hire claims, repair and total loss and rehabilitation all falling outside of the new Portal, MedCo and the new FCA regulatory regime, we will also likely see a dramatic shift towards increased costs in these areas for insurers.

What are the potential unintended consequences?

If a combination of the lower damage rates of the tariff and a five-fold increase in the small claims limit effectively cuts out lawyers, the new Portal will be a gateway for claims farmers, whether they are called claims management companies (CMCs), McKenzie friends or a ‘legal adviser’ in some other guise.

The new portal will also provide fraudsters with unrestricted access to policyholder data through DVLA and MID. Pushing out lawyers in favour of CMCs will deny claimants access to independent, professional legal advice and potentially result in more, not less fraud. Replacing one set of problems with an even worse set is just not sensible.

How will this impact the consumer?

It is difficult to see how consumers will benefit, even if motor premiums don’t go up as much as they might have done otherwise. Consumers making claims will receive less compensation, likely be cajoled into using a CMC to help them navigate a still complicated process, will lose out on the capacity to retain professional legal advice and for those who are in disadvantaged groups, such as the elderly or the digitally excluded, they are likely to go without the compensation to which they should be entitled, having been left confused and baffled by the system.

What impact will it have on Legal Expenses insurance (LEI) products and how these are distributed?

The current LEI model, provided under BTE policies, will certainly be broken, particularly if the small claims track limit is increased to £5,000 as currently planned. Under this planned increase, legal costs will no longer be payable by the at-fault insurer and will instead fall to the legal expenses’ provider.

It may be sold as a bolt-on to motor premiums, but this would certainly reduce or even wipe out any financial benefits to the reforms for consumers. To our knowledge, the market has yet to devise a new, fully-funded model of LEI, which continues to allow claimants access to professional legal representation.

From your perspective in their current form, are the reforms a good thing or not?

The new LIP Portal is going to open the claims process up to a wide range of potential abuses. It must be ‘frictionless’ to have any chance of being used by LiPs but this makes fraud easier to do and harder to spot.

Dealing with CMCs instead of the ‘professional’ law firms will create a whole new set of challenges and costs for the insurance sector. Tackling fraud should be at the centre of most regulatory developments but is noticeably absent from the reasoning behind the biggest set of reforms to the claims sector in a generation.

Reform across various areas of the claims process is long overdue, but these reforms are not the answer. The negative consequences simply outweigh the perceived benefits.Next week we will be asking the same questions to Andrew Morrish, Claims Director from Aviva – watch this space…..