In the last edition of Insurance People, Roger Snook wrote an entertaining and thought provoking article assessing the reaction to Lord Justice Jackson’s Report. As a principally claimant Personal Injury lawyer I welcome this opportunity to respond and add my views to the debate.
Roger’s main point appeared to be that it is ‘all about the money’ and it’s difficult to disagree with that ultimately from the perspective of the professionals involved on all sides of the fence. While Roger took some carefully aimed shots at rapacious claimant lawyers, we mustn’t forget that for insurers it is ‘all about the money’ as well.
Of course claimant lawyers will protest that a reduction in their fees is likely to lead to a reduction in access to justice and service to clients. However the many forward thinking members of the Claimant’s side of the profession have already, for years, been heavily investing in IT and other efficiency improving measures which will allow them to provide an acceptable level of service in a reduced costs environment, if the fixed costs are pitched at the right level.
The real sufferers may be those claimants who have unusual or more complex cases that do not easily lend themselves to a fixed costs regime.
It is also true that it is the major claimant Personal Injury firms who have been able to afford the efficiency investment that may be necessary, which could leave high street solicitors behind. The death of the high street Personal Injury practitioner may be an unintended consequence of Jackson’s proposals but nevertheless it is a very real risk. It’s quite surprising that Jackson seems to envisage a more traditional style of personal injury claims handling, for example requiring that claimants entering into a Contingency Fee Agreement are separately advised by another solicitor, when the practical consequences of his proposals will be to reward the large and efficient whilst possibly marginalising the smaller firms.
Roger suggests that lawyers are approaching this on the basis that if they can’t get their fees from defendant’s insurers, they will charge their clients, for example by way of success fees deducted from damages. I suspect that may not be the ultimate result as market forces are likely to take over.
We have now existed for a decade or so in an environment where personal injury claimants expect to receive 100 per cent of their damages with no deductions and it is going to be difficult to get that genie back in the bottle. If the Jackson reforms where introduced it may not be long before claimant lawyers are advertising no deductions from damages, not withstanding that they would have the right to take up to 25 per cent. That is just how the market is likely to work and indeed Jackson seems to anticipate and welcome that. Again, this may favour the larger firms, capable of delivering efficiency savings rather than the smaller high street operators.
Virtually everyone in the industry appears to deplore referral fees but we are all hooked on them, with insurers and brokers being some of the principal beneficiaries. It is all very well to accuse claimant lawyers of being ‘all about the money’ and simply regarding claims as sources of profit. We all know that there are many insurers and brokers out there making a tidy sum from referral fees who would have to review their entire business models if Jackson’s proposed ban of referral fees was introduced.
Claimant lawyers are also accused of protesting about claimants rights as a smokescreen for protecting their own profit margins. While obviously there is a self interest in the claimant lobby, as there is with the defendant lobby, we must not forget that claimants should be protected and without their own lawyers it is unlikely that the paying insurance industry will perform that function for them. As claimant solicitors, we often see very low or even derisory offers made to claimants in the first instance, often generated by the claims valuation software routinely used by insurers, and there is no reason to believe that insurers would change that practice if claimant lawyers were marginalised out of the system.
It is also interesting to consider the impact on insurers’ own practices from the requirement for speedier and more efficient claims handling.
The new claims process for lower value road traffic accident claims is due to commence on the 30th April and will allow insurers 15 days to give a response on liability to a claim.
Almost certainly many claims will end up being exited out of the system, not because of inventive claimant lawyers’ activities, but simply because insurers have not geared up their claims departments to respond in these shorter timescales.
At the present time there are insurance company claims departments that cannot even open their post for many weeks, so the chances of them being able to respond within limited timescales are perhaps minimal.
The same could be said for the potential benefits which the fixed costs systems proposed by Jackson may bring. Those benefits are only available if insurers are making early and sensible decisions and then communicating those swiftly. Insurers will, as always, face the choice between spending their money on handling claims or trying to please their shareholders and running their claims departments on a shoestring even if in the long-term that results in higher costs.
Roger is quite right, it is ‘all about the money’ and no one appreciates that more keenly than insurance company chief executives.
Notes to editors
Andrew Welch is head of insurance at Stephensons Solicitors LLP, based in the North West. He is a partner and deputy chairman of the firm.
The latest edition of Legal 500 ranks Stephensons as a top 60 UK law firm.
Media information: Lianne Tracey
Stephensons Solicitors LLP
T: 01942 774225