Written evidence from the Association
of Personal Injury Lawyers (CMI 27)
The Association of Personal Injury Lawyers (APIL)
is a not-for-profit organisation with a 20-year history of working
to help injured people gain the access to justice they need and
deserve. Our 4,700 members are committed to supporting the association's
aims, and all are signed up to APIL's code of conduct and consumer
charter. Membership comprises mostly solicitors, along with barristers,
legal executives, paralegals and some academics.
APIL has a long history of liaison with other stakeholders,
consumer representatives, and governments and devolved assemblies
across the UK with a view to achieving the association's aims,
which are:
To promote
full and just compensation for all types of personal injury.
To promote
and develop expertise in the practice of personal injury law.
To promote
wider redress for personal injury in the legal system.
To campaign
for improvements in personal injury law.
To promote
safety and alert the public to hazards wherever they arise.
We welcome the opportunity to provide evidence to
the Transport Committee on the cost of motor insurance. While
noting the terms of reference, our evidence is restricted to issues
which reflect the expertise of our members.
INTRODUCTION AND
KEY PRINCIPLES
1. We understand the driving need both politically
and economically to keep expenditure under control. It must be
remembered, however, that people who are injured through no fault
of their own must retain the right to claim the redress which
they need and which is their right.
2. When discussing the cost of personal
injury claims, it is common to hear that rising costs are to be
laid at the door of the claimant and the claimant lawyer and that
the answer is to restrict the availability of independent legal
advice and restrict the claimant's damages. This is a very serious
proposition for those people who are vulnerable and who need,
and have a right, to claim proper redress when they are guilty
of nothing except, in the case of this evidence, getting into
their vehicles. It is not the role of the injured person to subsidise
the insurance industry.
3. This does not mean that there is no room
for improvement in the system, and APIL continues with its policy
of dialogue and education, and works hard to introduce improvements
wherever possible and, more importantly, where such improvements
are to the benefit of people injured through no fault of their
own.
4. We are concerned about many of the misconceptions
which currently abound about the system for claiming compensation
in England and Wales, some of which have been presented to the
Transport Select Committee, and which we would like to correct
in this evidence.
THE COST
OF NEEDLESS
INJURY
5. It must be remembered that it is expensive
to injure someone, especially if that injury is very serious and
leads to a need for future medical care, or adaptations to the
home. Even so-called 'small claims' can be incredibly traumatic
for those who suffer the injury. Compensation is only available
when negligence is proven and, while it may sound trite, the best
way to cut costs is obviously to cut the negligence which causes
needless injury in the first place.
6. Insurers continue to suggest that costs
are increasing and are disproportionate to damages recovered.
We know from the last UK Bodily Injuries Award Study[42]
that legal costs as a percentage of total payouts by insurers[43]
have remained constant at 30% for many years. We also know that
damages remain below the levels that the Law Commission suggested
they should be at in 1999 when the commission suggested an increase
in damages for pain, suffering and loss of amenity. This suggests
that costs are probably at about the right level but that, in
fact, damages need to increase.
7. Where injuries do occur it is imperative,
both for the welfare of the injured person and in order to limit
legal costs that claims for compensation are dealt with quickly
and efficiently and here the remedy is very much in the insurers'
own hands. Research conducted by APIL has shown that defendants
(and, therefore, their insurers) indulge in behaviour which inevitably
prolongs cases and results in increased costs. In more than 2,000
cases relating to lower value claims which ultimately settled
for general damages of £5,000 or less:
the final
offer made to a claimant by a defendant's insurer was more than
50% higher than the first offer;
63% of defendants'
insurers who subsequently admitted liability failed to do so during
the so-called "protocol period" (the first three months
of the claim); and
73% of cases
included an element of complexity.
8. The insurance industry has also developed
a growing practise of effectively generating claims against itself,
and distorting the market in a bid to pay potential claims early
in an effort to avoid paying legal costs. Earlier evidence to
the committee has included reference to what the Association of
British Insurers euphemistically calls 'third party assistance'.
What this actually means is that the insurer of the defendant
driver approaches the injured person and offers to settle the
claim direct. The insurer is, in this instance, its own judge
and jury about what compensation is appropriate. APIL has serious
concerns about this practice, not least because it is not transparent,
nor is it properly regulated, which means injured people, who
are usually completely unfamiliar with how compensation should
be calculated, are doubly vulnerable. Not all insurers are as
scrupulous as they should be about reminding people that they
are entitled to independent legal advice. We will never know just
how many people are being under-compensated because they are left
to deal with their cases direct with insurers, when they have
little or no knowledge of how the system works.
9. In addition, by approaching claimants
in this way, the insurance companies are "capturing"
claims from people who might never have claimed compensation otherwise.
They do this through direct telephone calls, text messages and
emails. Contrary to the popular and perpetual myth, there is no
"compensation culture" in this country. People are not
queuing up to claim compensation payments. Many people who are
approached in this way may not have claimed compensation at all
if they had not been approached by the insurer, but it is very
difficult for anyone to ignore repeated and persistent offers
of compensation. One example has been provided by one of our members
in Scotland whose daughter, a student, was involved in a road
traffic collision. Although a little shaken and sore after the
event, she did not need to see her doctor. She was, however, pursued
relentlessly by the insurer of the driver who was at fault in
this instance, and who wanted to offer her compensation. In the
end her privacy was invaded to such an extent that she accepted
the payment which was being forced on her just to prevent the
intrusion.
NEW CLAIMS
PROCESS FOR
ROAD TRAFFIC
CLAIMS UNDER
THE VALUE
OF £10,000
10. The committee has heard evidence already
about the new claims process. It was introduced by the previous
Government to reduce delay and costs in the system for these types
of claims. The new process was developed with the hard work and
co-operation of all key stakeholders, including APIL, which sits
on the board of stakeholders which manages and governs the process.
According to the Ministry of Justice, the new system accommodates
75% of all personal injury claims.
11. It may well be the case that, in time, the
new system delivers on the Government's objectives, but to suggest
at this stage that there is any firm evidence that it is doing
so now is both misleading and premature. The new scheme is only
seven months old and has not been properly tried or tested. Only
a handful of cases have even reached the final stage of the process.
The electronic portal is still beset by quite fundamental teething
problems and there are other significant issues to resolve, for
example, who owns it, who runs it, who pays for it and who owns
the data. It needs to run for at least a year and then be subject
to careful review to make sure it's effective before even contemplating
any extension of the scheme to other categories of case, as suggested
by Lord Young, and has been mentioned in previous evidence.
REFERRAL FEES
12. Earlier evidence that referral fees increase
the cost of premiums was highly misleading. Referral fees are
paid usually by solicitors to claims management companies, if
they provide them with cases, or to insurance companies for passing
cases on to them. In the latter example, these are usually situations
in which the solicitor is part of a panel of law firms retained
by the insurer.
13. There are no circumstances of which we are
aware which would result in referral fees generating an increase
in insurance premiums. As is the case with any marketing activity,
a solicitor is not allowed to recover the cost of referral fees
from the losing party, but pays the fee from his own account.
14. APIL's only concern in relation to referral
fees is, however, the protection of the injured person, and we
believe the only way to achieve this is through a combination
of regulation (as this is not a properly regulated area) and education.
15. It is vital that consumers are properly protected
and that referral fees are transparent. Both proper consumer protection
and transparency would be impossible to deliver if referral fees
were to be driven back underground, which is what the Legal Services
Consumer Panel concludes could be the consequence of a ban or
a cap. It is proving equally unrealistic to expect solicitors
to police the activities of introducers. What is needed now is
robust, joined-up regulation, and a level playing field for all
agencies involved. This, together with a culture of openness and
transparency, is particularly important with Alternative Business
Structures on the horizon, as they will create an even more complex
market. The Solicitors Regulation Authority needs to play a more
active role in the policing of solicitors' behaviour and, in particular,
in ensuring that injured people are aware of the existence of
referral fee arrangements from the outset of cases.
FRAUD
16. Fraud is clearly a major problem for the
insurance industry. Obviously, there is no place for fraudulent
claims in the legal system and APIL has actively sought dialogue,
and is currently working, with those directly involved in this
issue, including the Insurance Fraud Bureau (IFB) and the Forum
of Insurance Lawyers (FOIL). We are very keen actively to assist
the IFB in its drive to work with stakeholders to reduce fraud
and some of the activities we are considering in conjunction with
the IFB are a survey of APIL members and exploration of the possibility
of helping APIL members improve screening for fraud.
17. While lawyers have to have a degree of good
faith in what a client says, investigations and evidence play
a large part in determining whether or not a case has merit. We
know our members take this issue extremely seriously and are far
from complacent about fraud. But we need the insurers and all
those who are familiar with fraudulent tactics, to keep us informed
about current developments so our members are properly prepared
when dealing with their clients.
18. Insurers are obviously entitled to do whatever
is necessary, and should certainly fight a case if they believe
a case is clearly fraudulent, although claims of fraud should,
obviously, be supported with clear evidence.
LORD JUSTICE
JACKSON'S
RECOMMENDATIONS
19. Lord Justice Jackson's proposals for civil
litigation costs have been lauded in earlier evidence as the answer
to the insurers' difficulties in relation to the high cost of
motor insurance. This is despite the fact that he offers no remedy
for the major concerns expressed in relation to fraud, or the
propensity for younger drivers to have more bodily injury claims.
20. In fact, Lord Justice Jackson's recommendations
will deny access to justice for many of the most seriously injured
people, as he is seeking to transfer part of the burden of costs
onto the innocent party and he is doing this in a climate in which
we know damages are too low in any event. Legal costs should continue
to be met by the negligent person who caused the needless injury
in the first place, not the innocent victim who was injured through
no fault of his own. This "Jackson levy" on seriously
injured people is unfair and unjust.
December 2010
42 ABI and IUA 4th Bodily Injury Awards Study 2007. Back
43
Ibid (damages to costs ratio in private car comprehensive claims). Back
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