James Dalton, head of motor and liability for the Association of British Insurers (ABI), says that it is time for a ‘public policy debate’ on removing all damages for ‘low-value, low-impact and very minor injury claims’.
He also questions whether there is a place for personal injury lawyers at all in what he describes as ‘low-value’ factory-based claims.
So in its ideal world, ABI members would not have to pay any compensation to the vast majority of injured innocent victims of motor accidents. Even those whose injuries would be deemed serious enough to warrant compensation might find themselves unable to get a lawyer to help them. Those are, to say the least, pretty radical ideas.
But are there not equally radical ideas to be debated surrounding the position of motor and employer’s liability insurers?
- Both have a guaranteed market, because motor and employer’s liability insurance are compulsory;
- The ABI says that all ‘low-value’ claims are the same in terms of the work a personal injury lawyer is required to do. It has been so successful in persuading the government on this point that, where the injured claimant is seeking damages of up to £25,000, the lawyer’s costs are basically fixed. We can discuss elsewhere whether £25,000 compensation for injury should be considered ‘low-value’. All I would say is that while it may seem that way to the ABI and to the government, to an individual claimant it is a great deal of money.
- The level at which the lawyer’s fee is fixed is, in the vast majority of claims, so low that it is hard – in many cases impossible – for the lawyer to pursue the matter economically. The thinking behind the ridiculously low fees seems to be that lawyers do not need to advertise or market themselves in any way, so the fees make no provision for any kind of marketing budget. Furthermore, the fees are calculated on a basket of cases. The assumption is that a lawyer will attract sufficient numbers of cases that, while there may be some where the fees are uneconomic, there will be others on which the lawyer can make a profit and the two balance themselves out.
- All the arguments made on the previous point could be applied equally to compulsory motor and employer’s liability insurance. The ‘work’ insurers have to do in terms of issuing the policy is basically the same from one insured to the next. I do not know, because the insurance industry refuses to allow we claimant representatives access to their data: but let us say, for argument’s sake, that an 18-year-old driver is more likely to have an accident and is therefore a greater risk to an insurer than a 38-year-old driver. When you apply the ‘basket of cases’ approach, surely that risk evens itself out? There will be cases where the insurers do not make money and plenty of others where they do.
- Why do insurers need to advertise? Motor and employer’s liability cover are compulsory – we have to get insurance so we have to go to someone. If the insurers sat back and did nothing we would still come. The same cannot be said for personal injury lawyers, yet we apparently do not need a marketing budget. Surely motor and employer’s liability insurers have even less justification for advertising? Yet they run high-profile media advertising campaigns and sports sponsorship which must cost them tens of millions of pounds a year.
My question, then, is why can’t insurance premiums be fixed, and at a level which removes the insurers’ vast marketing budget? Yes, there would be winners and losers but, across the board, the total premiums paid and therefore the cost to consumers would be reduced.
Why is that debate any less worthy or likely to find favour with the government than the changes which have already been imposed on personal injury claimants and their lawyers, and those further changes which the ABI is now suggesting?
Neille Ryan, partner, Furley Page, Canterbury