The following is a copy on an article in today?s Sunday Telegraph by Teresa Hunter in the Money and Jobs section. It is not available online, so I have retyped it for the Backroom.
The cost of motor cover and other insurance will fall under radical plans to overhaul the personal injury claims system.
The Association of British Insurers will next week call for an independent arbitration system to replace the court cases that decide personal injury claims today. The ABI reckons this will significantly reduce the £2bn a year that insures pay in legal fees and other costs.
The proposed new system will be similar to the Personal Injuries Board set up in Ireland last year. That body has already slashed claims costs by three quarters, as well as putting an end to lengthy legal battles and high lawyers? bills.
The soaring cost of personal injury claims, which in the motor section alone top £10bn, has been pushing up premiums in recent years.
Companies face big bills if someone is hurt in a road accident, a train crash, an accident at work or following medical procedures. For every £1 paid in compensation, insurers pay 40p to lawyers to meet legal costs. It is estimated that some £200 of the average premium goes towards covering the risk of having to meet a personal injury claim.
Whereas today each claim is decided individually, the new arbitrator would establish benchmarks for each category of injury. In Ireland, for example, a whiplash injury to the neck which recovers within a year is worth £9,400, while a similar back injury is worth £11,000.
Ian Crowther of the AA said: ?These new proposals will aim to take personal injury claims out of court and take lawyers out of the loop altogether, thereby cutting costs significantly. There?s no doubt that the soaring cost of PI claims has been a significant contributor to insurance premium inflation. If they could be brought under control, premiums could be cut.?
But insurers can expect resistance from the legal profession. The Association of Personal Injury Lawyers said the plan would leave injured people in the hands of insurers ? whose first duty is to their shareholders. It said its own research showed that initial offers of compensation by insurers were on average half of the final agreed settlement, and that two thirds of defendants initially deny liability.
The ABI claimed that the proposed reforms would not cut compensation to genuine claimants. It added: ?Many guenuine claimants are deterred from claiming because the system is slow and expensive. We believe the new system will dramatically speed up the average time it takes to settle the average personal injury claim. Similar reforms in Ireland have led to compensation being paid to claimants three times more quickly and four times more cheaply than under the litigation system, with no decrease in compensation paid to claimants.?
It seems to be a good idea to me, what do you think?
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Roger
I read frequently, but only post when I have something useful to say.
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Having had someone claim against me for personal injury and had sight of the costs involved, I would support any proposal that takes greedy solictors out of the loop. In this case the TP was paid £1700 and I received papers from the court over the disputed statement of costs which a firm of solicitors were charging at over £4800 plus VAT. Some of the items were ridiculous like 10 phone calls @ £35 each - didn't say who they were to, or how long they were for. Letters were £30 each and there were a lot, but the main element of cost was for "consideration time". It was as straightforward as can be - I'd done him up the boot at very low speed and held my hands up straight away.
I have my doubts as to the credibility of the whole claim anyway, but solicitors seem to be profiting more than the "injured" parties.
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Although this sounds like a good move with regard to points made in a recent thread I started ....
www.honestjohn.co.uk/forum/post/index.htm?t=36692&...f
.... I reckon a major problem is bogus claims, not just the way genuine claims are handled.
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Reduced legal bills sounds like a very tempting idea, but the alternatives are not easy.
The "fixed tariff" system for criminal injuries has led to some alarmingly low payouts for victims. Unless any new system for personal injuries avoids that sort of outcome, it'll meet a lot of resistance.
If the idea is not to reduce the payout in each case, then overall costs may not actually fall -- a more accessible system of remedies may lead to more cases being taken through to a conclusion.
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Agree with you NoWheels. I got from behind while on my bike last year. Still sorting it out (driver denied it despite independent witness). Part of the trouble is that he won't get in touch with his insurance company so all these things take time.
It hurt quite a bit, and still does now after a long ride, so I wouldn't be happy with a "ticked box" amount.
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I like the comment about bogus claims. It was good to read a story a few days ago about someone who who was trying it on with a tripping case. He got sent down for contempt.
There are many more reasons for the high costs of claims than "greedy lawyers". Plastic bumpers that cost £1000 to fix for instance. Insurance companys that needlessly resist or delay claims. How many times on this backroom have we heard a tale of woe from someone who is struggling with a claim, followed by advice (often from an insurance expert) to see a solicitor.
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Lawman, I think you missed the title - "Personal Injury Claims".
However, are we sure that claims are too high in £ value ? Are we sure that claims are too picky ? If someone has got whiplash, then why shouldn't they claim ? Why shouldn't they get loads of money ?
If the insurance companies were known for paying out approriate amounts and admitting liability, then the lawyers wouldn't be needed and would find the bottom dropping out of their market.
If an insurance company made a reasonable offer to begin with, then why would it ever go further ? And if it did then people would find out the sometimes horrible ramifications of rejecting a reasonable offer and then proceeding to litigation.
Cheddar makes, for once, a valid point - the issue is bogus claims. Ones where the injury does not exist, the incident never happened, or it was contrived, or any of a number of other perversions. Make the penalities for getting caught out at that very high, and you might make a difference.
But the idea of limiting payouts is worrying - are we saying that the children with the dead father are claiming too much, or that they are claiming too often ?
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Cheddar makes, for once, a valid point - the issue is bogus claims. >>
Damned by faint praise!
But the idea of limiting payouts is worrying - are we saying that the children with the dead father are claiming too much, or that they are claiming too often ?
I see two issues, 1/ bogus claims and 2/ insurance admin/legal costs being often excessive and out of proportion to the value of the claim. I would not however advocate capping the claim based on a category of injury.
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Those legal costs quoted above are approximately double what you'd expect to find a PI solicitor charging - although I suppose they could be including the uplift in those figures from a "no win no fee" arrangement.
What should then happen is that the insurer (or rather their legal department/solicitors) apply to the Court for taxation, i.e., setting a fair level for both the price and amount of work done as well as the uplift.
The uplift works so that if the claim has a 60% chance of success at the outset then the solicitor should be paid a little over 167% of the normal rate to allow for the 40% of similar claims that fail, paying nothing, plus interest for delayed payment.
Personally I do think that a personal injury solicitors are charging Defendants at or above what the top of the market would allow if they were selling their services to a private or commercial client and there is probably scope for reducing fees - but as FM2R says, lawyers fulfil their role because insurers asssess a certain level of resistance to claims to be the most profitable for them (and this is passed on, at least in part, as lower premiums than would otherwise have been the case). I'm not arguing that lawyers actually lower premiums, by the way, merely that a certain level of work is necessary to ensure that insurers pay up to Claimants who are, mostly, deserving. (Obviously I have no time or sympathy for the vanishingly small proportion of lawyers who pad their bills or for the small proportion of bogus Claimants).
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In all fairness I do not think that these proposals would have much effect on the way that serious PI claims are dealt with. A tariff type scheme would only be appropriate for the more minor type of claims. Fraud will not be reduced unless the police/insurance companies are prepared to to invest significant sums (ultimately at our expense) in investigating and following up fraud of this nature. I recall reading recently about an insurance company (Norwich Union?) who had uncovered a large scale insurance fraud, but the police failed to investigate it as it was "not a priority"
There is also a fairly common philosophy that ripping off insurance companies is not really fraud. An example would be when a bag is stolen at an airport, and when the claim is made the bag is alleged to have contained all sorts of expensive things. I had a pretty wealthy friend at Uni who did this, and saw nothing wrong with it. Whe was red faced when the bag eventually turned up.
The attitude seems to be " I have paid all these premiums all these years, why not get a little of it back?"
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