Examination of Witnesses (Questions 194-259)
Q194 Chair: Good
morning, gentlemen, and welcome to the Transport Select Committee.
Could I ask you, please, to identify yourselves, giving your name
and the organisation you are representing for our records? I will
start at the end here.
Steve Evans: My
name is Steve Evans. I am Chief Executive of Accident Exchange
Group PLC. We are a credit hire company. I also sit on the Executive
Committee of the Credit Hire Organisation. I sit on the Technical
Committee of the General Terms of Agreement Committee, which effectively
regulates credit hire. It is equally represented between insurers
and credit hire companies.
Tony Baker: I am
Tony Baker. I am the former Deputy Director General of the ABI
and now Director General of the Credit Hire Organisation, which
contains firms that provide services to motorists involved in
accidents that are not their fault.
Q195 Chair: Just
the name of the organisation. This is just for our records.
Laurence Beck:
My name is Laurence Beck. I am on the Executive of the Claims
Standards Council and I am the Managing Director of Accident Advice
Helpline, which is a claims management company.
David Bott: I am
David Bott, the Vice President of APIL, a not for profit organisation
that campaigns on behalf of injured people.
Q196 Chair: Thank
you. What would you say is the main cause of the escalation of
insurance premiums in recent years—the major cause?
Tony Baker: Can
I start? It gives me an opportunity of correcting some of the
misconceptions that were evident from the first session that you
just did. There are a couple of them. You made the point, I believe—
Q197 Chair: Would
you answer the question, please?
Tony Baker: It
answers the question as well.
Q198 Chair: We
have a number of questions. What are the main causes?
Tony Baker: It
answers the question. I think you said in the last four to five
years there has been a very sharp increase in premiums. In fact
that is not the case. In 2005, the insurance industry in private
motor premiums collected 7.6 billion—
Q199 Chair: You
are disputing the question. Is there an issue about the cost of
premiums?
Tony Baker: Premiums have actually gone down up until the last year.
Q200 Chair: I
am asking you the reason for the escalation. Is your answer then
that they haven't gone up?
Tony Baker: They
have only gone up in the last few months.
Q201 Chair: Why?
Tony Baker: As
a result of the fact that motor insurers have lost so much money
over the last few years they have reached a stage where they can
no longer maintain the current premium levels. Motor insurance
has become a commodity, totally price-driven. You go to a website,
you see which is the cheapest and you buy it. But, at some stage,
to be the cheapest on there you start losing more and more money.
That is what insurers have been doing. They have been collecting
in far too little and they have reached a stage where they can
no longer maintain that level of premiums. Previously, in the
past, you would have one or two insurers—
Q202 Chair: Your
answer is clear. Are there any other views on the reason for the
big increase in insurance premiums?
Laurence Beck:
The data that we are provided with is very weak, so it is very
difficult for us. There is a lot of miscommunication in the marketplace.
Personally, the data that I have seen is very conflicting.
I don't think you can dispute that the cost of premiums has gone
up in terms of what is being charged to the public.
Q203 Kwasi Kwarteng: Over
five years or just the last three months? Over what time frame
when you say it has gone up?
Laurence Beck:
Over the past five years, looking at the data that I have
seen, it has gone up, but it has only gone up—
Q204 Kwasi Kwarteng: So
you are disputing what Mr Baker says?
Laurence Beck:
It has only gone up substantially in—
Q205 Chair: Mr
Beck and the other panellists, let me just put it to you. We have
a number of figures presented to us, including the AA's British
Insurance Premium Index, which shows that premiums have increased
by 29.9% in the year to October 2010. If we look for young drivers,
we are looking, from the Shoparound average premiums, up to a
46.6% increase for young male drivers and up to a 58.8% increase
for young female drivers. Those are some examples. I am asking
you for your views on why the costs have gone up. Mr Beck, are
you disputing those figures and, if you are not, could you tell
us why you think the costs have gone up?
Laurence Beck:
I am not disputing the figures.
Q206 Chair: Can
you give us your reasons why you think the costs have gone up?
Laurence Beck:
Why do I believe that the cost of insurance has gone up recently?
Chair: Yes.
Laurence Beck:
I think that the marketplace has changed hugely for insurance
companies over the past five years. We now live in a world where
we buy our insurance from a meerkat. We are heavily bombarded
with advertisements all day every day at peak hours, where the
cost of advertising is 10 or 15 times the cost of daytime advertising,
with Go Compare, "Buy your insurance from a meerkat",
any other comparison site you can think of. I am struggling at
the moment because I am sitting here in front of all of you, but
I am sure you understand where I am coming from. That market is
the most competitive market in this country.
Q207 Chair: I
am asking you why premiums have gone up. Will you please answer
the question?
Laurence Beck:
Because they have had to cut their prices over the last five years
because they are in a competitive market. There have made big
losses.
Q208 Chair: Right. So
it is competitive markets and—
Laurence Beck:
So, in order to recover—
Q209 Chair: When
I am speaking, please don't continue. I am trying to get a straight
answer from the witnesses who are here in front of the Committee
today to answer the questions put to them. Mr Beck, you are telling
me it is to do with competition, if I understand you correctly.
Is that right? Are there any other reasons for the increases I have
quoted? I will ask Mr Beck first. You don't have to say any more.
I want to give you the opportunity to do so.
Laurence Beck:
One of the reasons I believe that they put their prices up, and
the gentleman who was sitting here before was speaking about a
readjustment, is that insurance has been sold too cheaply over
the last five years. That is what I am trying to say.
Q210 Chair: Can
I just suggest to our witnesses that it is always better to answer
the question directly instead of trying to divert because I will
always come back to the key question?
Laurence Beck:
I apologise. I was just trying—
Q211 Chair: It
is getting clearer, Mr Beck. It is getting clearer. Those are
the reasons you wish to give us. Mr Bott?
David Bott: Thank
you, Chair. I think it would be unlikely that it was just one
reason why costs have gone up. I think there have been multiple
reasons. APIL have done a survey relatively recently and out of
2,000 cases of the lower value claims—and these are the
claims that the insurers have been talking about quite a lot today
and in previous days—in more than 60% of those in which
the insurers admitted liability eventually, they admitted liability
late or they admitted liability outside of the protocol period.
I don't want to blind people with science or legality here, but
within the structure of the law after 2003, if an insurer admitted
liability within the first three months of a claim, it meant that
there was a fixed cost price at that point in time. If they did
not admit it within the first three months, it meant the claimants
were allowed to issue proceedings, which led to increased costs.
So our statistics show that for 60% of the time insurers could
have admitted liability earlier. They admitted it later and that
led to cost. One of the reasons, I would say, is inefficiency
on behalf of the insurers in so far as delay and also just not
handling things correctly is concerned.
Another point was raised earlier. I forget the name
of the person, but he talked about it being a low bar, in essence,
for claimants to somehow win, as if there was an Aladdin's cave.
Q212 Chair: It
doesn't matter who said what. I just want your views, please.
David Bott: I would
say, if you wanted to reduce the spend, reduce the negligence
in the first place—obviously if that is not disputed—and
also to deal with matters straightaway. I think that would reduce
costs. That would stop the increase in costs.
Q213 Chair: Mr
Evans, do you want to give any views on the reason for the increase
or the major reason?
Steve Evans: I
think the reason for the increase is that the insurance industry
is trying to be competitive again in a difficult economic environment,
having sustained low levels of prices over the past 10 or 15 years.
We have some data from the ABI which I am not sure has been supplied
to the Committee, but, effectively, it reveals that motor insurance
has made a loss every year since 1994.
Q214 Chair: We
have a lot of figures. I have quoted to you at the beginning
of this questioning some of the figures that we are working from
and I am seeking your views, from your experience, on why we are
in this position. I don't want you to divert into other areas
unless you just want to say the figures I have told you are
wrong. I just want a straight answer, please.
Steve Evans: I
am trying to give you one, madam Chair, I promise.
Chair: I will persist
until I get one.
Steve Evans: The
issue around it is that the insurance market, as has been told
to you before, is a dysfunctional marketplace. It has been far
too competitive over the past five, 10 or 15 years. What we are
experiencing now is a market where investment income, which is
usually where insurers are able to subsidise the motor underwriting
that they do at competitive prices, has fallen away because of
the recession that we are in and, as a consequence, insurers are
having to raise prices and catch up with a new normal.
Q215 Chair: We
have heard a lot about referral fees. Could each of you please
tell us if you receive referral fees, how much they are and how
you think that works?
Steve Evans: If
I can talk as a credit hire company, we don't receive referral
fees. We do pay referral fees to distribution channels that introduce
business to us. We work with a number of motor manufacturers,
very large plc dealer groups and motor dealers as well. We resist
working with insurer-referred business because the demands from
insurers for referral fees are just too high to make the business
model viable.
Q216 Chair: How
much do they want?
Steve Evans: It's
a volatile number.
Q217 Chair: But
it's too high. So what kind of area?
Steve Evans: It
can be 50% or 60% of the cost of a vehicle hire transaction. If
you have an average transaction and the hire charge is £500
to £600, £300 or £400 of that. It is a really materially
high figure.
Q218 Chair: You
say you do pay some referral fees, I think you said at the beginning
of this?
Steve Evans: We
pay some referral fees to motor dealers and the referral sources
that we get.
Q219 Chair: How
much do you pay? How is that done?
Steve Evans: It
ranges from £50 to £200 or £250 as an indicative
figure. We don't charge referral fees to solicitors where we pass
solicitors business, although solicitors do actively pay for personal
injury claims in the marketplace. One of the things that is prevalent
in all of the insurance tenders that I have seen is that
the insurers insist on those claims that they refer that they
retain the personal injury claim and they market that to their
own solicitors.
One of the questions that wasn't answered to your
satisfaction earlier on was about this net sum zero position.
If there are referral fees being paid, how does that not affect
the price of insurance? The reality is that, in many insurance
cycles, the referral commission they get balances some solicitor
costs that they have. By increasing the income line they can offset
that against a cost line and so not have the dynamic peak and
trough that you might expect it to be.
From a referral point of view we do pay commissions.
From a referral point of view we think that the market has been
driven fairly aggressively by insurers seeking to see that as
a nonpremium income opportunity over the course of the last
two or three years.
Q220 Chair: Who
else would like to answer the question about referral fees? I
want to know if you get them, if you pay them and how much.
Laurence Beck:
I run a claims management company. The majority of our income
comes from referral fees that we receive from solicitors. It is
very difficult to explain to people about referral fees because
there is this stigma attached to a referral fee.
Q221 Chair: Why
don't you try telling us? How is it based?
Laurence Beck:
When I started our business 10 years ago, what I did, when there
was the change in the law, as a very small businessman I decided
to take a full page advert in Yellow Pages in every book
in the country. What I would do is I would take the phone calls
of people that had had accidents and then I would sell the claims
to solicitors regionally. That was it. So I had a spend of—
Q222 Chair: You
sold the claim. How was the amount of money involved determined?
Laurence Beck:
I would have to work out how much I spent on advertising. What
I would do is I would split it up amongst the claims I got and
I would sell those claims to the solicitor and make a very small
margin—maybe 10% or 15%. That was it. That's how the business
started. The business nowadays is no different. The referral fees
that companies like myself get are absolutely no different to
a solicitor doing their own advertising and taking the calls themselves.
The only benefit is that, if I get a call for a particular claimant
in Manchester or one in Birmingham, I can give them to a Manchester
or a Birmingham solicitor, which makes me more efficient than
a solicitor doing it themselves.
Q223 Chair: Do
you have agreements with particular solicitors on which referrals
you will make?
Laurence Beck:
Yes, we do. We have a panel solicitor agreement with every firm.
We have 200 firms on our panel now.
Q224 Chair: How
would a firm get on your panel?
Laurence Beck:
How would they get on our panel?
Chair: Yes.
Laurence Beck:
They would meet my Legal Director, who would interview them. They
would fill out a questionnaire. We would obviously go and have
a look at their offices and we would decide whether or not we
thought that they were a suitable firm to come on our panel.
Q225 Chair: At
what point would the amount of referral fee be discussed and agreed?
Laurence Beck:
With the solicitor?
Chair: With the solicitor.
Laurence Beck:
It is at the first meeting. Normally the first conversation you
would have with a solicitor is, "How much would you charge
for a particular claim type?" That would obviously depend
on the success of our marketing and how well we are doing. The
point is that a referral fee is just a marketing cost. It is just
the cost of an advert in Yellow Pages. There is this bizarre
notion amongst people outside our industry that see us as some
kind of—I don't want to mix my words up—that it's
not a viable industry and we should not be here. But all we are
is a marketing company. My previous experience in business was
marketing for a property company. My background is that I am a
chartered surveyor and I ended up working for a marketing company,
doing some marketing for some properties. We are just marketing
people. That is all we do.
This bizarre notion that the cost of the referral
fee has actually increased insurance premiums is very strange,
because the only cost to the premium, from our side of the business,
is what the insurers have to pay the solicitors who are defending
the claimants. Average payments to solicitors over the last seven
years have probably come down from the late 1990s at about £3,500
for a road traffic accident to about £1,800 maximum in 2003,
when predictive fees came in, and now they are down at circa £1,400.
If insurance companies are paying £1,400 in
legal costs for 75% of the RTAs which fall under the fixed fee
regime, whatever a solicitor pays in referral fees to get the
advert that is generated from Yellow Pages or wherever
is absolutely irrelevant. They could pay anything from 1p to £1,399.99.
The only factor that's going to change is how much profit that
solicitor makes.
Q226 Chair: Is
there anything else?
Laurence Beck:
It has absolutely zero effect. It is bizarre.
Q227 Chair: You
have made your point. Is there anything else in terms of referral
fees? You have told us about those.
Laurence Beck:
I have told you that we are a marketing company. We market
for the industry. We have a panel of over 200 solicitors. We have
been in the business for a long time. We very much support regulation.
We are just marketing people; we are not really legal people.
Q228 Chair: Mr
Baker, did you want to tell us anything about referral fees from
where you are?
Tony Baker: Typically
for credit hire companies, they would pay a referral for the hire
claim, which, as Mr Evans said, could be anything from nothing
up to a couple of hundred pounds. One of the very significant
players has become insurance companies themselves. In the motor
insurance business they are significant middlemen, whether they
are referring claims for the hire of a vehicle to supply the motorist
to give them mobility, referring claims to a solicitor, or referring
claims for a legal expenses policy. They are substantial middlemen
in this whole process.
Q229 Chair: Mr
Bott?
David Bott: Chair,
I would just like to make two points. I am in private practice.
I am a claimant's solicitor, a managing partner. We do pay referral
fees.
Q230 Chair: Who
do you pay them to?
David Bott: Claims
management companies, with regards to some of the work that we
do. We also selfadvertise as well. At the end of any particular
claim we receive fees, either fixed fees or if we have issued
on an hourly rate, and there is no point at the end of the claim
where what we receive is different whether we have paid a referral
fee or whether we market it under our own steam. The idea that
a referral fee has led in itself to an increase in claims just
doesn't quite add up unfortunately, because the amount that a
solicitor gets at the end of the claim is bound by the fixed fee
regime or, alternatively, by an hourly rate if claims are issued.
So we do both in so far as we selfmarket and, if we find
that either that isn't sufficient or, alternatively, if our selfmarketing
isn't working that well, we will go to the market at large. That
is just the nature of the free market as it is at this point in
time.
Q231 Chair: We
have had evidence that legal costs can be almost as much as compensation
claims paid out to individuals. Does that suggest there is something
wrong?
David Bott: One
of the things that has not been mentioned overly this morning
is the Claims Portal that started in April of last year. This
portal applies to road traffic accidents of up to £10,000.
As a statistic, that is 75% of the whole of the PI market. I am
a director of Portal Co. and I have been involved with the portal
for 18 months to two years now. In so far as I was there right
at the start, I was involved in the project steering group, model
office workshop, etcetera, etcetera. It seems to me that the portal
may, in part, be the answer to some of the questions that have
been raised at this Committee. The portal was implemented in April
of last year and that has led to a quicker, slicker, and, hopefully,
cheaper for the insurers, process with regards to the vast majority.
We are in a position where the industry at large
came up with an industry-agreed solution where we have designed
the boat, built the boat, launched the boat and at the moment
it appears, if we are looking to bring Jackson in, we just leave
it in the harbour. We don't know because the statistics aren't
back yet, but it could well be that one of the industry-led solutions,
as in the portal that was implemented in April of last year, could
be, in part, the answer to suppressing legal costs.
As a managing partner of a law firm, average costs
that my law firm has received over the last five years have steadily
gone down. Even on the ABI statistics, they say that legal costs
over the last five years have stayed steady at 30%. It isn't the
legal spend in and of itself that is the problem. It seems to
be that it is the increase of claims that is coming through that
is the problem.
Chair: We will come on
to that as a particular point. Mr Stewart?
Q232 Iain Stewart: Thank
you. I would like to go back to what is driving the increased
costs. You have all made the point that the increase in premiums
is just the market correcting itself after an artificially low
period, but that doesn't get away from the fact that the cost
to insurers is going up. I want to get your view as to what is
driving that. You say it is not referral fees and it is not legal
costs, but what is it? Is it that claims are more expensive? Are
cars more expensive to repair? Is it fraud? What is increasing
the cost?
Laurence Beck:
It is quite interesting to look at the figures. As I was explaining
before, I was really trying to look at the figures to get an understanding
of them. We analysed what the figures were and I am quite into
statistical analysis. It appears to me that the actual cost per
claim has not increased. What has happened is there are more claims
and people need to understand this. When the insurers come in
and say the cost of claims is going up, if you look at what has
happened to legal costs, there has been a dramatic reduction in
legal costs for RTA claims. Clearly, as David confirmed, in the
late 1990s, solicitors were working by the hour with partners
running whiplash cases with average fees circa £3,500. We
are sitting in an environment today where we have a portal system
which everybody is using, it is fully agreed, and inside the system
fees are £1,400?
David Bott: £1,350.
Laurence Beck:
£1,350. Average insurance premiums late 1990s to Claims Direct,
The Accident Group, were £1,500? RTA insurance premiums nowadays
are £350, maybe £400. Are the ballpark figures correct?
David Bott: Yes.
Laurence Beck:
I find it very difficult to understand the data and how insurers
can say the cost of claims has gone up. What I think is clear
is that the number of claims has gone up.
Tony Baker: Can
I just disagree with that? The claim frequency of private cars
in the UK has gone down steadily every year for the last decade.
In the year 2000 you had a 19.4% chance of being involved in a
claim. By 2005 it was 18.1, and last year, based on the first
nine months, it was down to 15.2. There may be a few more claims
coming through because there are more vehicles on the road, but
the chances of having a claim have been dropping dramatically
over the decade.
The important thing to bear in mind is that there
need not be an increase in claims costs for you to justify an
increase in premiums. If you haven't collected enough in claims
in the past, claims costs need not go up dramatically; it is what
you have collected to pay for them. If you haven't been collecting
enough, you make a loss. So even if the claims stay exactly at
the same figure, if you haven't collected enough in premiums,
you need to collect more in premiums to pay for the existing claims.
Q233 Iain Stewart: Your
view is that there is no increase in the cost?
Tony Baker: Claim
costs have gone up over the last few years but not dramatically
so. If you took the amount we paid out in claims 10 years ago,
adjusted it for inflation and adjusted it for the vehicles on
the road, you would find virtually no change in the cost, but
in that 10-year period you would see that motor premiums collected
from the public have hardly increased in that whole time. The
big difference, to which Mr Evans referred, is investment income.
Five years ago you were earning 10% to 15% investment income on
all the premiums you collected. Now you are earning under 5%.
You have lost out on the best part of 10% that was contributing
to keeping your insurance costs lower. That has disappeared and
you have to make it up in some way.
Q234 Iain Stewart: I
find that quite surprising because all the evidence we've had
is that there are more claims being made and that the middlemen
are driving that increase. You would dispute that?
Tony Baker: There
are more claims purely because there are more vehicles on the
road. The claim frequency, as I have given you the figures,
has actually fallen.
Q235 Iain Stewart: All
this advertising of "no win no fee" that has been made
by the middle companies has had no effect at all?
Tony Baker: Everybody
will prove in various statistics that "no win no fee"
has led to a small increase in claims but not for the last two
or three years. It peaked and has not increased over the last
two or three years.
Q236 Steve Baker: Mr
Bott, you particularly mentioned the free market as it is and
you have also talked about fixed fees and so on, but forgive me
because what I know about this I have learned in the course
of this inquiry. Could you just explain to what extent there is
price fixing, whether it is Government imposed or industry agreed?
David Bott: If
you were to leave here today and unfortunately have an accident
through no fault of your own and wish to claim, there are potentially
four different ways that your legal representative could be paid.
Am I okay to continue? I will keep it very, very brief.
Q237 Chair: Be
as brief as you can but give the key points in the answer.
David Bott: The
first way is that today, as of April of last year, if your injuries
are worth less than £10,000, you will be dealt with via the
RTA claims portal. That has a fixed fee regime. If you get to
the end of the claims portal and it is resolved, the most likely
amount of compensation that the solicitor will get for dealing
with your claim is £1,350, which is a fixed fee of £1,200,
together with a 12.5% mark-up if there was this "no win no
fee" agreement on the back of it. So it is £1,200 base
costs, plus 12.5%. If it falls out of the portal for whatever
reason, then it reverts back to the rules as they were prior to
April and, again, you move into what is called the predictive
costs regime. That predictive costs regime means that the solicitor
will receive an £800 base fee, together with 20% of the value
of the general damages and the claim at large. Again, the averages
for that are on or around £1,350, so it is basically the
same.
If the whole thing falls apart, if an agreement can't
be reached between the claimant and the defendants, then proceedings
will no doubt be issued. If proceedings are issued and the matter
is resolved at the end of proceedings, then the solicitor will
be paid on an hourly rate.
The fourth option is that, if your injury is worth
less than £1,000, the solicitor will receive what is called
the small claims track fee, which is £50 plus VAT.
Q238 Steve Baker: Gosh,
thank you very much indeed. That's fascinating. Who imposes that
regime—the law and the Government or the industry by mutual
agreement?
David Bott: The
Government. It's a mixture. Obviously the predictive costs regime
came in via legislation. Hourly rates is a matter that is decided
by the judiciary. So it is a mixture of the MoJ and the DCA.
Q239 Steve Baker: In
a sense, although we call it a free market, it is actually a heavily
hampered market with a highly structured process, which is imposed
by a series of authorities?
David Bott: Yes,
absolutely. There is not a mechanism without severe sanction by
the courts for a claimant to issue. We talked earlier about—
Chair: I think your answer
is clear on that.
Q240 Julian Sturdy: Can
I ask everyone on the panel in quite simplistic terms, if I can,
why you think personal injury claims have been going up when technology
in new cars and car manufacturers' safety measures within cars
is increasing all the time, and road safety is improving across
the country? Why do you think personal injury claims have been
rising?
Laurence Beck:
Access to justice. This is all about access to justice. Access
to justice comes at a huge cost. That is the reason the Government
gave it up, because it was too expensive for them to run it through
legal aid.
Q241 Chair: Are
there any other views?
Tony Baker: That
is by far the main reason. If in fact only 10% of people that
were entitled to compensation were claiming, then you advertise
and encourage people and it goes to 20%, your costs double.
Q242 Chair: Have
personal injury claims gone up?
Tony Baker: The
cost of personal injury claims has gone up, yes.
Chair: By how much?
Julian Sturdy: Can I just
follow up on that, Chair? We all accept that they have gone up.
What impact do you think they have been having on motor insurers?
Tony Baker: They
are one of the claims costs that have to be borne by an insurance
company, paying for bodily injury claims, legal costs, expenses,
repairing vehicles, hire of vehicles and all the rest of it. They
are just one of the factors. But, at the end of the day, motor
insurers will sit here and assure you that, yes, it is all done
very scientifically. But if you are selling through an aggregator
on a website you know that, unless your premium is in one of the
top three, you won't get any business. Your premium may say you
should be charging £500 and the top three on the aggregator
site say it is £420; you charge £420 if you want to
get any business, and you hope. Hope has gone.
Q243 Julian Sturdy: Do
you accept with personal injury claims going up—and I accept
the reasons you have given for that—that that has been impacting
on the cost of motor insurance?
Tony Baker: It
is one of the factors that has certainly impacted but, as I explained,
motor premiums have been kept below competitive levels really
for the last few years and it has only been in the last six months
that they have increased.
The other thing to bear in mind with the AA index,
which you did quote and the figures are exactly as you said, is
that they are the premiums that an insurance company asks; they
are not necessarily what the public pays. On a motor renewal,
you will shop around and you will go for a cheaper alternative.
If you look at all the publicity in the last five years for motor
insurers, they will say, "Every year we are increasing our
premiums by 5%, 10%, 15%", but they don't collect that money
because people shop around. They collect the money from loyal
policy holders that keep renewing and don't shop around, but as
there are fewer and fewer of those, as it has become more and
more of a commodity, people shop around for a cheaper quote.
Q244 Chair: On
the personal injury claims can you just give me an idea of how
much they have gone up, Mr Bott?
David Bott: Can
I just make a point?
Q245 Chair: No,
I want an answer to the question. I don't want a report. I want
an answer to the question. I thought Mr Baker might. Mr Baker,
can you help me on that?
David Bott: The
Department of Work—
Q246 Chair: Just
a moment. I am asking Mr Baker. I want you to give me some clear
information on the extent to which personal injury claims have
increased.
Tony Baker: I shall
just give you the figures that I have. It depends on what
period of time obviously you are looking at, in terms of what
period of time. But I have a table that would give it to
you for a few years.
Q247 Chair: I
am surprised you don't have that but I would like you to send
the information to the Committee, please.
Tony Baker: I do
have it.
Q248 Chair: Okay.
You can answer that question when you've got it. Mr Bott, I don't
want other issues. I want to know if personal injuries have gone
up.
David Bott: The
Department for Work and Pensions keeps statistics on every personal
injury claim. They are the most reliable statistics. Those statistics
show that over the piece they have actually gone down over the
last five years. With regards to motor, they have gone up over
the last five years.
Q249 Chair: No.
Can I just say to you, Mr Bott, that you are a witness here at
a very serious inquiry? This inquiry is about the cost of motor
insurance. When I ask you about personal injury claims in the
context of this inquiry, why on earth should you start referring
to it in another context? We are talking about insurance claims.
David Bott: I take
your point.
Tony Baker: I do
in fact have the figures now. I am sorry for the delay. For bodily
injury claims in the year 2001, which is the first one I have
here, the average claim payment was £2,556. By 2009 it had
gone up to £3,632.
Chair: There are a number
of claims. I am not wanting some average. Anyway, you had better
send me the information. We do have some information of our own
and I am just surprised that coming here to this inquiry today
as people so experienced in this field, which is the reason you have
been called here, you can't answer a simple question like that.
Q250 Gavin Shuker: Thank
you, Chair. Just briefly I would like the witnesses to give their
thoughts on the Jackson review into legal fees. Is anyone willing
to do that?
Tony Baker: I am
quite happy to kick off.
Q251 Gavin Shuker: What
are your general thoughts on it?
Tony Baker: I believe
that there are parts—
Chair: This is as
concisely as possible, please, answering the question directly.
Tony Baker: As
directly as possible, I believe he had good motives but his ideas
are flawed. If you implemented Jackson, it would deny access to
justice for literally thousands, tens of thousands, hundreds of
thousands of genuine claimants, who would be a lot worse off.
Q252 Chair: Are
there any more views on that, equally concisely and clearly?
Steve Evans: It
is an industry view that we concur with.
David Bott: Our
concern is that it actually reduces the amount of compensation
for the seriously injured—that there is in fact a levy with
regards to the seriously injured. It also doesn't address the
question of fraud that has been raised in this Committee today
and it doesn't combat young drivers.
Q253 Chair: So
does that mean you don't agree with it?
David Bott: That's
right.
Q254 Chair: Okay,
that's all. We are just trying to ascertain your views as simply
as possible.
Laurence Beck:
I think the Jackson report was put together at a time when the
industry had been through absolute turmoil for seven or eight
years.
Q255 Chair: But
do you agree with the proposals or don't you?
Laurence Beck:
Do I agree with it? I think some of the intentions are very good
but I think most of the good that will come out of Jackson happens
to already be in place and it is working very well.
Q256 Chair: So
do you agree with the new proposals he is making?
Laurence Beck:
Not with all of them.
Q257 Chair: Which
don't you agree with?
Laurence Beck:
Sorry, which don't I agree with?
Chair: Yes.
Laurence Beck:
I think very much having fixed fees moving forward all the way
through, different types of claims, and having protocols and processes
in place that will reduce the legal cost of fighting personal
injury claims is the way forward—very much so. I think Jackson
has put that forward.
Tony Baker: If
you cannot recover an after event insurance premium, you deny
access to justice. The Government removed legal aid in 1999 and
said that in insurance the private sector solution was better.
Jackson recommends removal of recoverability of ATE premiums,
so it would be fundamentally flawed on that basis.
Chair: You have given
us your answers.
Q258 Kelvin Hopkins: In
effect, the insurance industry in personal injury gets a subsidy
from the National Health Service because you don't pay the full
costs of treatment under the National Health Service for people
who are injured in motor accidents. It strikes me that with a
privatised health service there might be a world where the full
costs of all the health treatment given to injured people would
come on to the insurance industry. Are we not moving in that direction,
not with my support, I may say, but are we not moving in that
direction?
Tony Baker: The
Government has looked at this in the past in terms of why do people
who go mountaineering and are involved in an injury not pay for
their injury? Why don't we have compulsory insurance for mountaineers?
In France, there are 39 compulsory insurance classes. In the UK,
there are about 14. Yes, you could extend it and compel people,
but it was interesting that when I saw Lord Justice Jackson he
said, "The solution to all this is to have before the event
legal expenses insurance. Everybody will buy that willingly and
that will be the solution."
Q259 Chair: Are
there any other points on Mr Hopkins' question to you, briefly,
please?
Laurence Beck:
I don't fully understand the question or the way the mechanics
would work, but I think this is about people that are injured.
They have been injured. If this is about people that haven't been
injured and all of their claims are fraudulent, I can understand
the level of scrutiny and the concern over the cost of the insurance
premium. If you don't want injured people to be allowed to make
a personal injury claim and you want to remove their access to
justice, then the Government should legislate for that. They should
take away their human rights.
Chair: So you don't see
any other route. Okay, you have made your views clear. Thank you
very much, gentlemen, for coming and for your contributions in
answering our questions.
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