Amidst the theoretical debate on 'compensation culture', there are some practical areas in need of rapid and radical change, writes Stephen Haddrill

The past 12 months have been marked by an occasionally bitter debate about whether Britain has a so-called 'compensation culture' and what should be done about it. Most commentators are now coming to the view that we do not yet have an embedded cultural problem.


Both lawyers and insurers will readily agree that in many areas, the system does not get the right compensation to the right people at the right time. The system is too slow, there is not enough rehabilitation, and transaction costs are too high.


Nowhere is this more relevant than in compensation for personal injury. It is appalling that the average employers' liability personal injury claim takes three years to settle. It is equally appalling that legal and other costs add an extra 40p on top of every pound paid in compensation.


It is also lamentable that the system does not encourage more rehabilitation. The faster people get good care after an accident, the more likely they are to recover fully and get back to work and a full life quickly.


Conversely, a majority of those who get no early care and are off work for more than eight months will die before they ever have an opportunity to return to employment.


For these reasons, the Association of British Insurers (ABI) wants to develop a partnership with lawyers and the government to create a new, fairer system. There are, of course, strong vested interests at stake. One side's costs are the other side's income. Both need to compromise.


In the ABI's report, Care and Compensation, published in December last year, the association set out proposals that try to chart a fair path. For claims of less than £25,000, the goal is to reduce the average time taken to settle claims from three years to six months. Insurers will determine their liability in three months and make an offer in six months. To achieve this, the ABI seeks earlier notification of claims to the employers or insurers on a standard form, combined with a new public tariff of damages.


Once an offer is made, insurers are also willing to fund the claimant to seek independent legal advice on whether that offer is consistent with the new tariff if it falls above the small claims limit. In the first instance, the ABI proposes independent mediation if the offer is rejected, and powers for the courts to penalise either side for unreasonable behaviour. These proposals would also ensure rehabilitation is delivered more quickly.


Insurers are not seeking to deny access to legal advice. The ABI considers legal advice on offers above the small claims limit as a vital part of our proposals. But it sees no justification for months of legal inquiry being made before a claim is submitted, in some cases building up costs in excess of the claim.


Nothing in the ABI's proposals stops claimants going to court if they wish, if agreement cannot be reached during this process. Frivolous applications to the court on both sides are deterred but that is in the interest of all seeking justice.


No action is no option. The insurance industry is taking steps to improve the system, such as producing a code of best practice on rehabilitation. But the wide-ranging reforms needed require the support from all sides.


The ABI looks forward to working with the legal community in helping to fashion a fairer, simpler personal injury compensation system. We both share one common aim - to get the right result for genuine claimants.


Stephen Haddrill is the director-general of the Association of British Insurers