18 April 2008
In this first of an occasional series of sponsored columns, Rob Allison considers the delayed government proposals to reform the process for personal injury claims and the changes ahead for local authorities
Reform of the personal injury claims system is long overdue. So too is the outcome of the Ministry of Justice's consultation on its plans for change, Case track limits and the claims process for personal injury claims.
Published in April 2007, the consultation was due to end last July. The long wait for a ministerial response since then has caused a degree of unrest, with calls for clarification and action from some quarters.
Last year's announcement marked a much-needed shake-up of how personal injury claims were handled. The subsequent paper's main recommendations sought to tackle head on issues such as the length of time taken to resolve claims and the disproportionately high costs of relatively low-value claims.
The Association of British Insurers has published some statistics, sourced from the then Department for Constitutional Affairs, which show that on average for every £1 spent on compensation, 43p is spent on legal costs. For claims less than £5,000 in value, for every £1 in personal injury compensation, claimant lawyers receive an additional 88p for motor claims, and 93p for casualty claims.
Zurich worked with the government and others to help shape the proposals. Our response to the paper accepts the need to accelerate the claims process yet calls for compromise where legitimate concern exists.
We challenged the proposal for a decision on liability to be made within 30 working days (60 calendar days) for all casualty cases, failing which the case would fall outside the fixed-fee process. This was based on our experience of handling complex casualty claims in the public sector, some of which are not suitable for this fast-track model. We are acutely aware of the resource demands placed on the sector and fear a situation where some organisations might not have the administrative infrastructure to meet these timescales.
The 30-day limit is seen as one of the paper's key recommendations, and is arguably the one with the biggest impact for local authorities. The current timescale is 90 calendar days (60 working days). Unless both insurers and customers re-engineer their internal processes, the chances of hitting the new deadline are slim.
Document storage, retrieval and transmission all need to be reassessed, with electronic and e-mail solutions becoming the method of choice. The recommendations for set timescales for notification, however, will doubtless have a more positive impact on costs. For example, requiring solicitors to send a claim to the insurer within five working days from taking on a case should control excess legal costs.
In this way, the build-up of costs by investigation, before a claim is even intimated to the insurers or defendants, should become a thing of the past. It would also accelerate the administration associated with making the claim, producing a greater chance of being able to successfully introduce rehabilitation into the damages equation.
Getting the injured citizen back to work more quickly must surely be of benefit to all.
The plan is for fixed costs to be applied to the various stages in the process. The MoJ also proposes differential costs where the value of the claim is greater than £2,500 and invites views on whether that fixed fee should be dependent on the value of the case or on the duration of any hearing on it. The opportunity to have a process framed by fixed, staged, legal costs brings certainty and transparency to the process and should go a long way to solving the disproportionate costs that have been such a feature of recent years.
The downside to the MoJ's proposals is that any failure to achieve the timetable takes the case out of the fixed-cost regime into an area where claimant solicitors can generate higher legal fees. Avoiding this might involve improving administrative processes or integrating internal departments better to ensure that accurate information is readily available.
Organisations that can achieve the agreed final timescales will benefit from lower claims costs and faster settlement times, which are essential for any organisation looking to positively influence and control their spending associated with claims experience, risk management and expense ratios.
Rob Allison is managing director of Zurich Municipal
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