Insurers tell us they are committed to ‘paying genuine claimants the compensation they are entitled to’ (‘Tackling the Compensation Culture’, Association of British Insurers, 5 September). Of course, in order to use this statement as the starting point for discussion, we need to examine how they define ‘genuine claimants’ and ‘the compensation they are entitled to’.
A clue is given elsewhere in the same document when they suggest most people claiming compensation for whiplash injury are not genuine claimants. As for the amount of compensation, while the ABI asserts that claimants dealing directly with insurers do better than those with legal representation, the experience of claimant personal injury lawyers is that insurers’ initial offers are invariably far too low; and that, often, litigation is required to secure the correct level of compensation for our clients.
It is an open secret that many insurers use quantum assessment software and that this software is frequently calibrated to produce figures lower than court awards and Judicial Studies Board guideline figures. This is borne out by the fact that many district judges will refer disparagingly to these tools when these cases proceed to disposal hearings.
The judgment of His Honour Judge Platt in Fallowes v Harkers Transport gives an insight into the activity of one insurer that suggests, even when dealing among themselves, insurers adopt business methods that, as Platt says, defendant insurers believe fall ‘somewhere between very sharp practice and outright fraud’.
In Fallowes, the defendant’s vehicle collided with the claimant’s parked car. RSA, insurers for the claimant, were using a scheme where, by channelling repairs through a wholly-owned subsidiary (RSAARL), it was charging the insurers for the driver at fault around 15% more than it was paying the repair garage. In other words, through RSAARL, RSA made a profit in the process of paying claims on behalf of its insured. In addition, its conduct in the litigation in flouting disclosure orders was heavily criticised by the judge.
RSA has pursued claims in several county courts against different insurers unwilling to pay the inflated charges. RSA appears to be standing its ground, insisting the practice is legitimate, and is appealing the judgment in Fallowes. Clearly, for the insurance industry, the sums involved are large and, if the practice was endorsed by the Court of Appeal as legitimate, presumably to level the playing field other insurers would have to adopt a similar practice. The argument would be similar to the justification insurers raise for taking referral fees: the system is dysfunctional, but to stay competitive they have to work within it, ultimately at the expense of policyholders.
The insurance industry is pushing to take what it says are unnecessary layers of cost out of the claims process - those appear to include the cost to the claimant of competent independent legal advice. They tell us claimants do not need to be legally represented because they, the insurers, will deal fairly with their claims.
Their intentions may be entirely honourable. They may indeed recalibrate their quantum assessment software and retrain their claims handlers not to regard all personal injury claimants as dishonest malingerers - except of course those with whiplash injuries, who apparently will be required to provide objective proof in circumstances where no such proof can exist.
Unrepresented claimants generally do not understand how the process works or how much compensation they should recover; they are often in financial difficulties, either because of the accident or their personal circumstances. Insurance companies are sophisticated and complex businesses, which need to maximise profits to satisfy shareholders and compete with each other in a challenging market. They are, no doubt, already considering the opportunities that will become available for extending their control over the process with the advent of ABSs.
Insurers are adept at devising schemes to increase profits, even when dealing with each other, and are not renowned for generosity in paying out their customers’ claims. How likely is it that unrepresented third-party claimants will be safe in their hands?
Susan Brown is a director at Prolegal, a law firm specialising in personal injury, family and employment law