Written evidence from the Motor Accident
Solicitors' Society (MASS)
1. MASS is a non-profit making national association
of solicitors who specialise in road traffic accidents, representing
the accident victim. Formed in 1991, MASS promotes the highest
standards of legal services through education and representation
in the pursuit of justice for the victims of road traffic accidents.
MASS comprises 190 solicitor firms that employ over 2,000 legal
staff, throughout the UK. Collectively member firms conduct in
excess of 600,000 road traffic accident personal injury claims
each year.
2. The victim, and what is in their best interests,
must remain at the centre of the debate. Our goal in this debate
is to both protect the rights and interests of consumers who are
victims of genuine road traffic accidents as our constitutional
objective.
3. MASS fully endorses the Committee's view that
whatever the solution to the problem, the "Government
should ensure that arrangements exist to enable people injured
in a motor accident to claim compensation, regardless of their
income".
OVERVIEW
4. The contributory factors to the cost of motor
insurance are many and complex. There will be no straightforward
solution to the problem of rising costs and each solution will
inevitably have impacts and consequences which must be considered
carefully in terms of what is gained and what is lost.
5. Referral fees are undoubtedly an important
factor of this debate, but it remains only one part of a possible
solution. It is vital that the motor accident industry is looked
at holistically and in considerable more depth before wide-reaching
reforms are introduced that are potentially over hasty, ill-conceived
and which may have highly detrimental negative consequences for
the principles of access to justice.
6. The solution must be evidence-based, with
a full understanding of the associated facts and figures—too
often at the moment the evidence is contradictory and potential
decisions are being taken on the basis of insufficient facts and
evidence of how the industry and insurance market operates and
the true costs involved.
7. Understanding the true scale of the issue
has proved protracted and difficult: there is still no accepted
figures for precisely how much the market in referral fees in
all its guises is worth. We strongly urge the Committee to seek
full disclosure from those concerned to determine exactly what
the market in referral fees is valued at. Only then can the possible
savings and future reductions in car insurance premiums be measured.
8. The debate has been distorted unfairly to
focus on injury claims and those who pay referral fees, including
lawyers, rather than the true cost of claims, which is the value
of those claims less all income received in referral fees and
commissions from other parties in the claims process.
9. Greater transparency must be forthcoming from
all parties to ensure that the scale and elements of the market
in referral fees are fully understood. For instance, very few
publicly-listed insurance companies have yet declared how much
they receive in referral fees. Admiral is one of the few companies
that have, announcing that 6% of its profits are derived from
referral fees, although a detailed breakdown of figures for other
types of commissions and payments are not published and so this
may be even higher.
10. Parliament, the Ministry of Justice, the
Office of Fair Trading (who initiated an investigation into related
elements on 8 September 2011) and professional representative
bodies and leading organisations must fully co-operate in pulling
together all the available evidence before fully implementing
the Government's proposed course of action.
11. MASS believes that clients will have guaranteed
access to justice and protection only through a genuine regulatory
and industry-wide commitment to challenge deeply entrenched commercial
interests and eliminating elements which add no value to claimants.
THE COST
OF CLAIMS
12. Road accident personal injury (RTAPI) claims
represent 790,999 claims out of a total of 987,381 claims, according
to Compensation Recovery Unit figures published by the Government
in respect of the year 2010-11, which is over 80% of all personal
injury claims.[1]
13. MASS rejects the accusation that the cost
of claims is out of control because of lawyers involved in personal
injury claims.
14. Since 2003 two separate fixed costs regimes
have existed for legal costs for Road Traffic Accident Personal
Injury (RTAPI) claims up to £10,000, representing in excess
of 75% of all RTAPI claims since 2003. The new streamlined process
for RTAPI claims, implemented by the Ministry of Justice on 30
April 2010, and agreed in full by the insurance industry and others,
are actually lower than those agreed in 2003. Both sets of costs
were negotiated and agreed without any reference to the payment
of referral fees.
15. MASS questions why motor insurance premiums
have risen so dramatically in recent years when there has been
in place fixed legal costs which insurers have agreed, for in
excess of 75% of all RTAPI claims since 2003?
16. The Association of British Insurers (ABI)
has stated that insurance premiums have risen 40% in the last
year, blaming rising legal costs. Yet one insurance comparison
website (tiger.co.uk) recently found that prices were 2.3% lower
in September 2011 than in August 2011, were down 4.5% in the third
quarter of 2011 when compared to the second quarter. Furthermore
they are predicting that motor insurance prices for the whole
of 2011 are likely to be about 17% higher than 2010 prices.[2]
Whilst such a rise would undoubtedly still be too high, there
is clearly an incomplete picture of the insurance industry which
should be addressed as a matter of urgency.
17. We note with interest press reports (Insurance
Times, 23 September 2011) that seven leading insurers—Ageas,
Allianz, AXA, Equity Red Star, Groupama, NFU Mutual, QBE and Zurich—are
considering a class action against RSA for inflating repair costs.
MASS hopes that the OFT will help determine the impact of such
factors on the high costs of motor insurance.
18. We remain extremely concerned at the continuing
rise of motor insurance premiums and the impact that this has
on consumer behaviour, including encouraging continued high levels
of driving without insurance.
IMPLEMENTATION OF
A REFERRAL
FEE BAN
19. With the Ministry of Justice having declared
that it will seek to introduce a ban on referral fees, probably
by amending the Legal Aid, Sentencing and Punishment of Offenders
(LASPO) Bill during its passage through the House of Lords, it
is imperative that the new measures are workable, fair and uniformly
applied across the entire sector.
20. Careful consideration must of course be given
to the definition of what constitutes a referral fee. It is essential
that it is wide enough to cover all potential commission fees,
administrative cost transfers and any other payments that may
be disguised.
21. MASS questions whether it should be just
referral fees captured by the ban or should it include all commissions
within the system arising from claims?
22. Should the ban on referral fees just apply
to the motor insurance sector? With increasing anecdotal evidence
of referral fees developing in other areas of the personal injury
market, the culture of such practices may only be eradicated if
a ban is applied across the entire personal injury market.
23. Who will oversee the referral fee ban? Is
it sufficient for the courts to implement or should a regulator
also play a role in oversight?
24. It is proposed that individuals are liable
to prosecution for breaching a potential ban, but should corporate
entities also be responsible with directors held responsible for
the actions of employees?
25. The purpose of a ban on referral fees is
to reduce motor insurance premiums in the future, but how is this
to be judged? Without some measurement process in place and a
binding commitment by the insurance sector to reduce premiums,
the benefits derived from a ban may not necessarily be passed
on to consumers. The Chief Executive of Admiral has even suggested
that car insurance may increase following a ban on referral fees.[3]
26. Previous experience suggests that savings
may not be passed on to the consumer. When the Motor Insurers'
Bureau, which gathers a levy from all of its UK insurance member
companies in order to pay for uninsured and untraced claims, returned
a surplus of £40 million unclaimed funding in March 2010,
this money was not returned to consumers through reduced motor
insurance premiums.[4]
INTERNATIONAL EXPERIENCE
27. There is potentially great value in learning
from the experience of other countries. However, it is vitally
important that all of the facts are known and understood given
the ease with which statistics can be manipulated or taken out
of context.
28. The ABI have stated recently motor premiums
fell by 16% in Ireland in the two years after reforms were implemented.
Yet this picture is challenged by at least one academic study
commissioned by public authorities and conducted by University
College Dublin and the University of Strathclyde. It concludes
that insurance premiums had been falling before the reforms (since
2003), whilst acknowledging that the reforms may have accelerated
the reduction.[5]
29. Ireland's second largest general insurer,
FBD, has said the insurance premiums are likely to continue to
fall not as a result of the reforms, but as a result of wider
economic conditions, with fewer people being able to afford to
own and operate cars, resulting in less motor insurance claims.[6]
JACKSON PROPOSALS
30. MASS continue to have grave reservations
with the planned changes to litigation funding and costs contained
within the Legal Aid, Sentencing and Punishment of Offenders Bill
(LASPO Bill) before Parliament. These proposed changes will significantly
impact consumers' access to justice in motor accident claims,
making it increasingly difficult for a person who has been injured
due to someone else's negligence to find, or fund, a lawyer to
represent them.
31. A vitally important element of this package,
as recommended by Lord Justice Jackson, is for a 10% increase
in general damages to compensate for abolishing recoverability
of success fees. MASS believes that this figure is woefully inadequate
to compensate the accident victim for the loss of recoverability
(of Success Fees and ATE premiums). However, with around 90% of
civil litigation cases never reaching court, the government has
admitted that it has no mechanism to force the 10% uplift to be
included in out-of-court offers.
32. The Government is relying upon the judges
to implement the uplift on the 10% of cases that do go to court:
"We would expect insurers to comply with the rates set
by the courts when making out-of-court settlements".[7]
We urgently hope that a mechanism is put in place to ensure that
this increase is implemented.
WHIPLASH
33. MASS reject the notion that whiplash as a
soft-tissue injury is somehow not a proper injury and should be
outlawed. Whiplash is indeed the most frequently reported injury
in motor vehicle crashes and due to the difficulties in diagnosis
and treatment, a percentage of claims are undoubtedly fraudulent.
34. However, the sudden extension of the neck
and whip-like movement frequently experienced in motor vehicle
accidents can have serious impacts upon ligaments, tendons, muscles,
intervertebral discs, facet joints and nerve roots. This can result
in a collection of symptoms including dizziness, headaches, blurred
vision, pain on swallowing, ringing in ears, tinnitus, memory
loss, cognitive impairment, sleep disturbance, fatigue and depression.
35. There is a growing body of evidence attesting
that whiplash injuries are not just about movement at high speed
but a complex series of pressures that can result in injury. For
instance, one study[8]
summarised the literature on crash tests on humans by concluding
that a change of velocity of 2.5 mph was sufficient to cause symptoms
and that 8.7 mph was required to cause vehicle damage.
FIXED FEES
36. It has been suggested that the fixed fees
under the RTA portal scheme should be dramatically reduced and
capped by legislation. MASS rejects this proposal as too prescriptive
and believes that these rates should be negotiated between claimants
and defendants. Such negotiations have taken place successfully
in 2003 and on the introduction of the portal in 2010 and we believe
that this would be the most appropriate way to reach agreement
going forward.
UNINSURED DRIVING
37. In 2009 there were 1.5 million uninsured
drivers, 20% of whom were between 17 and 20; the cost to the industry
is approximately £500 million, which adds about £30
per year to every policy for the law abiding motorist.
38. MASS welcomes the change implemented by the
government earlier this year with uninsured driver now being fined
or having their car confiscated even when they are not driving
it. However, we believe that significantly more can be done to
reduce the level of uninsured driving; for example, to investigate
the feasibility of lowering the cost of insurance premiums for
those young drivers who have a good driving record whilst driving
under their parent's motor insurance policy, and allowing them
to transfer the number of years without a claim to their own policy.
FRAUD
39. MASS welcomes any further initiatives that
can be undertaken to further reduce the high levels of fraud.
We will continue to work closely with the on-going work undertaken
by the Insurance Fraud Bureau (IFB)—an insurance industry
funded body—to combat motor insurance fraud. As an example
of this work, MASS are hosting a Motor Fraud forum in October
2011 with representatives from all the key stakeholders to discuss
working collaboratively to combat fraud within the motor industry.
EDUCATION
40. MASS will continue to campaign for improved
education of young drivers, reducing the incidence of uninsured
driving through improved reporting and effective deterrents, increased
penalties and reducing the high levels of fraud all have an important
contribution to make;
THIRD PARTY
CAPTURE
41. MASS believes that the practice of Third
Party Capture is placing the accident victim at an unfair and
distinct disadvantage. Offers made to accident victims by insurers
are frequently lower than the claim is worth, denying the victim
the service and compensation they deserve.
42. Where an injury has occurred, insurers often
make settlement offers without medical examinations to ascertain
the full extent and degree of the injury and any short, medium
or long term effects the injury may have. Pressure through telephone
calls and even unannounced doorstep visits are frequently done
at a time when accident victims are already vulnerable following
an accident.
43. There is a huge conflict of interest because
the insurer is acting on behalf of their policy holder (the defendant)
and the accident victim at the same time. An insurers' primary
objective is to save money—there is little or no regard
for the victims' best interests.
44. MASS believes that insurers are not adequately
regulated or monitored when carrying out Third Party Capture.
The ABI's voluntary code is not compulsory and only applies to
their members and therefore not all insurers. According to ABI
statistics in October 2010 only 34 Members had signed up to this
code, out of a membership of over 300. We await the 2011 figures
to see if more ABI members have signed up to the code during the
last year.
CLAIMS MANAGEMENT
COMPANIES
45. MASS unreservedly condemn some of the marketing
practices of Claims Management Companies (CMCs), particularly
that of cold calling and texting. Data protection laws should
be enforced and the terms and conditions of insurance premiums
should be amended as standard to protect consumers from having
their personal information sold on. Cold calling and texting are
an irritant at least, intrusive and do little to benefit the consumer
and such activities should be appropriately regulated.
THE FUTURE
IMPACT OF
ABSS
46. MASS remains concerned about the future impact
of the Legal Services Act 2007, in particular the introduction
of Alternative Business Structures (ABSs) from 6 October 2011.
Whilst we believe that there will never be a substitute for high
quality legal advice for motor accident victims, we are concerned
that cross-ownership or the delivery of legal advice by insurers
or CMC's will have a serious detrimental impact upon the genuine
victims of accidents. ABSs may be used to circumvent any ban on
referral fees and may seriously limit the victims' access to independent
legal advice, creating potential conflicts of interest by blurring
the distinction between defendant and claimant.
October 2011
1 Compensation Recovery Unit, Department for Work and
Pensions, May 2011, http://www.dwp.gov.uk/other-specialists/compensation-recovery-unit/performance-and-statistics/performance-statistics/ Back
2
Insurance Times, 23 September 2011 Back
3
Boss of insurer Admiral warns Government referral ban "will
push up car cover", Financial Mail, 11 September 2011, http://www.thisismoney.co.uk/money/markets/article-2035905/Boss-insurer-Admiral-warns-Government-referral-ban-push-car-cover.html#ixzz1XvkD6POE Back
4
Motor Insurers' Bureau Annual Report & Accounts 2009 Back
5
P.15, Dr Jonathan Ilan, "Four years of the Personal Injuries
Board: Assessing its impact", UCB/University of Strathclyde,
March 2009, http://www.ucd.ie/roads/roads_documents/compcultwp%20no2.pdf Back
6
Irish Examiner, 25 August 2011, http://www.irishexaminer.com/business/insurance-premiums-likely-to-fall-165299.html Back
7
MoJ spokeswoman, Law Society Gazette, 21 September 2011, http://www.lawgazette.co.uk/news/claimants-will-never-see-ten-cent-damages-uplift Back
8
Davis (1998) Back
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