Responses to Roger Snook’s article in the April Insurance People To read the original article go to www.insurancepeople.uk.com


a significant likelihood of increased selection against the After the Event (ATE) insurer. There will be a lot of


‘speccing’ as solicitors decide which risks they are going to seek, and which clients should have cover. This will lead to cases with the highest initial prospects of success not going into the pool of risk.


John Mullin


John Mullin ACII, Chartered Insurer, Managing Director, Composite Legal Expenses


R oger dismisses the


legitimate concerns that the claimant will have to pay insurance premiums out of his damages. In the regrettable absence of compulsory Before the Event (BTE) legal expenses insurance - an opportunity missed by Jackson - there will be


The solicitor will wait until the prospects deteriorate until cases are put on cover. The result can only lead to increased ATE premiums, or inability to prudently provide cover to protect rights in commercial matters.


I also wonder how keen, on the personal line side, are defendant insurers going to be as they meet increased numbers of individual plaintiffs operating under contingency arrangements, whose own costs they are going to have to meet where the plaintiff has failed.


Ignoring any accusations of


self-interest (that I will leave colleague solicitors to address), BTE was the solution to controlling solicitor’s costs. The BTE insurer cannot recover own side’s costs - it never has been able to do this. This logic is perhaps in the interests of a balanced access to justice and places the responsibility for controlling own side’s costs firmly on the BTE insurer. This practically addresses such concerns.


I am pleased that Roger continues to acknowledge the “sins of the past” that defendant insurers have “short-changed” claimants. Surely he must realise that in commercial situations against a background of economic difficulty there will continue to be attempts to “short- change” claimants.


I do fear for the claimant with the smaller type claim embracing personal injury, hire and accidental damage/excess. There is little meat on the bone for a


serious contingency fee here and I suspect that without legal expenses muscle, many in need will be left high and dry between the “short-changing” defendant insurer and the solicitor, who sees little profit in the small case even though the defendant insurer, if winning, will still pick up own costs.


I wish Roger was more of an advocate for compulsory BTE and the ability to have non-legal experts (in-house) negotiating with the defendant insurer in simple cases at low cost to both sides.


I am not certain that I agree with Roger that a change in government, or even a hung parliament or even a government of national unity, would effect these proposed changes. I think there will be greater economic priorities. Indeed even Justice Secretary Jack Straw has left himself with plenty of ‘wiggle’ room regarding implementing these proposed changes.


way of success fees deducted from damages. I suspect that may not be the ultimate result as market forces are likely to take over. We have now existed for a decade or so in an environment where personal injury claimants expect to receive 100% of their damages with no deductions and it’s going to be difficult to get that genie back in the bottle. If the Jackson reforms were introduced, it may not be long before claimant lawyers are advertising no deductions from damages, notwithstanding they would have the right to take up to 25%. That’s just how the market is likely to work and, indeed, Jackson seems to anticipate and welcome that. Again, this may favour the larger firms, capable of delivering efficiency savings rather than the smaller high street operators.


Virtually everyone in the industry appears to deplore


referral fees, but we’re all hooked on them, with insurers and brokers being some of the principal beneficiaries. It’s all very well to accuse claimant lawyers of being ‘all about the money’ and simply regarding claims as sources of profit. We all know there are many insurers and brokers out there making a tidy sum from referral fees who would have to review their entire business models if Jackson’s proposed ban of referral fees was introduced. Claimant lawyers are also accused of protesting about claimants’ rights as a


smokescreen for protecting their own profit margins. While obviously there is a self-interest in the claimant lobby, as there is with the defendant lobby, we mustn’t forget that claimants should be protected and without their own lawyers it’s unlikely that the paying insurance industry will perform that function for them.


As claimant solicitors, we often see very low or even derisory offers made to claimants initially, often generated by the claims valuation software routinely used by insurers. There’s no reason to believe that insurers would change that practice if claimant lawyers were marginalised out of the system.


It’s also interesting to consider the impact on insurers’ own practices from the requirement for speedier and more efficient claims handling. The new claims process for lower value road traffic accident claims was due to commence on the 30 April 2010 and will allow insurers 15 days to give a response on liability to a claim. Almost certainly many claims will end up being exited out of the system, not because of inventive claimant lawyers’ activities, but simply because insurers have not geared up their claims


departments to respond in these shorter timescales.


At the present time there are insurance company claims departments that cannot even open their post for many weeks, so the chances of them being able to respond within limited timescales are perhaps minimal. The same could be said for the potential benefits which the fixed costs systems proposed by Jackson may bring. Those benefits are only available if insurers are making early and sensible decisions and then communicating those swiftly. Insurers will, as always, face the choice between spending their money on handling claims, or trying to please their shareholders and running their claims departments on a shoestring even if in the long-term that results in higher costs.


Roger is quite right, it is ‘all about the money’ and no-one appreciates that more keenly than insurance company chief executives.


JUNE 2010 insurancepeople 11


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36