Modern Claims 24 - MSL: 2018 & Beyond: A Crossroad in Claims

The insurance industry has a profound focus on reducing costs, and that is threatening to change the nature of insurance itself Nick Garner

2018 & Beyond: A crossroad in claims 2018 & Beyond Supplement 2017

MODERN CLAIMS

WELCOME fter months and years of debate, February finally saw the announcement of a proposed set of reforms to the personal injury sector to address what many perceive to be a disproportionate volume of whiplash claims.

The scheduled date for the implementation of these reforms is October 2018, and in the next eighteen months there will be even more effort from all stakeholders to either modify or solidify the measures outlined in the Prisons and Courts Bill.

A

Whatever the final form these measures take, the potential effects on insurance premiums, access to representation, and fraud volume will be felt for years to come, regardless of the stance you may take on them. It is these years to come that this special supplement, in association with MSL, will seek to foresee and analyse. Modern Claims has passed the crystal ball to the participants in this supplement and invited them to share their predictions on the future of claims, and we have collected insights from insurers, brokers and personal injury solicitors to help you prepare for 2018 and beyond.

The effects of the whiplash reforms, whatever they may be, will be mostly felt by the millions of motorists who travel on Britain’s roads each and every day. However, there are numerous other, more niche road users who will also be affected by changes to personal injury claims, and we have also sought to include their

voices, namely those of cyclists and learner drivers, in these pages.

The result, I hope you will agree, is a balanced analysis of the longterm future of the insurance and claims sectors.

While it would be impossible to produce the definitive survival guide for industry professionals at a time of such change, uncertainty and turbulence, I hope this supplement will serve its purpose as an informative and enjoyable project that covers the challenges and changes that will be presented to the sector over the next eighteen months and beyond, wherever these may come from and whatever form these may take.

If you wanted to put forward your own viewpoints on this crossroad in claims, or if you have any other feedback or comments, please do get in touch via details below, and we’ll be happy to lend you our crystal ball for your predictions on what the future might hold.

Brendan Gurrie Editor, Modern Claims Magazine.

01765 600909 | @ModernBrendan | brendan@charltongrant.co.uk

CONTENTS

INTERVIEWS

FEATURES

6 Nick Garner

Nick Garner told Modern Claims about the opportunities and challenges he foresees in the claims sector. He believes one of these challenges will be the Ministry of Justice’s personal injury reforms, and he explains the impact these reforms will have on claimants and why the Alternative Claims Framework may be the best option for everyone.

10 Adrian Furness

Driving instructors and pupils are a niche group of road users who could also be effected by proposed reforms and other legislative and societal changes, as Symon Weedon explained to Modern Claims.

Group Editor Brendan Gurrie

March 2017

Project Manager Rachael Pearson

David Johnson examines the reasons behind the decrease in the discount rate for personal injury claims and the effect this will have on insurers and claimants in the future.

28 BTE & ATE in a post-reform world

18 Symon Weedon

Charles Layfield explains why he believes the Alternative Claims Framework (ACF) is the best solution for all of the issues the PI sector is currently facing, and why collaboration is the way forward to ensure the best outcome for all involved.

26 Assessing the impact of a negative discount rate

While a lot of discussion has centred around the impact of personal injury reforms on drivers, Duncan Dollimore argues that cyclists have been overlooked and that they will also be greatly affected, as he explains to Modern Claims.

The British Insurance Brokers’ Association has released its 2017 manifesto. Graeme Trudgill details the issues that brokers have brought up in the past year, and how BIBA will seek to address these in the next twelve months.

24 The Alternative Claims Framework

Technology is evolving more quickly than ever, and it’s imperative that the insurance industry keeps up in order to maintain customer service quality, as Adrian Furness told Modern Claims when he discussed personal injury reforms, detecting fraud and customer and employee engagement.

14 Duncan Dollimore

22 All roads lead to claims in the new 2017 BIBA Manifesto

Nick Garner forecasts changes in the motor legal expenses insurance and claims services market as a result of the Government’s personal injury reforms.

30 Case Study: MSL

An excerpt from a claimant’s diary following a car accident in May 2019.

Editorial Assistant Poppy Green

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I think, fundamentally, when I compare today to 2003, the industry is a blander place, under the cosh of regulation and compliance and too often used as a political football by the government

INTERVIEW

Nick Garner Nick Garner told Modern Claims about the opportunities and challenges he foresees in the claims sector. He believes one of these challenges will be the Ministry of Justice’s personal injury reforms, and he explains the impact these reforms will have on claimants and why the Alternative Claims Framework may be the best option for everyone.

Q A

What changes have you witnessed within the industry since you first began working at MSL?

Change in insurance has accelerated rapidly since the global financial crisis (GFC) in 2008, but even back in 2003 the industry was hardly fossilised. Insurers had just been through a series of mega mergers in the late 1990s. Royal Insurance and Sun Alliance had merged in 1996, and the Norwich Union merged with CGU in 1999. However, the GFC heralded the onset of ‘all-powerful regulation’ via the FCA, PRA and EU capital rules (Solvency II), which is slowly throttling the life out of insurance. Insurance regulation increasingly mirrors the banks; it’s no surprise that plenty of bankers are in senior roles in insurers. Capital management is the order of the day for chief executives, as opposed to entrepreneurship, because in an era of low interest rates CEOs need to be experts in getting the best return on their capital.

Turning to claims, there has always been friction and conflict between claimant and defendant. The insurers have been determined to reduce the cost of claims in order to maintain their profits and pay dividends. This is a direct impact of historically low interest rates, which has reduced investment returns. The CMA enquiry into credit hire, LASPO and the recent attack on access to justice, via the personal injury reforms, are all derived from insurers lobbying government to reduce claims costs and preserve profitability. Granted, some claimant firms have crossed the line and gamed the system, and that has encouraged government to step in with the blunt instrument of legislation. There is also a suspicion that the government’s assault on the claims sector is a quid pro quo for raising insurance premium tax (IPT), which seems destined to rise inexorably towards the 20% mark.

So, macro-economic factors have permeated their way right down the insurance food chain, and we are all feeling the effects. I think, fundamentally, when I compare today to 2003, the industry is a blander place, under the cosh of regulation and compliance and too often used as a political football by the government. It’s lost its swagger and confidence as a result.

Q A

but in truth politicians love to pass laws; that’s what they go into politics to do. Brexit and the promise of a lighter legislative touch is a sideshow, and I am convinced that regulatory pressures will be just as relentless with Britain outside the EU. The march of technology is also relentless and brings with it significant challenges to businesses that interact with consumers.

Although driverless cars are grabbing the headlines, right now the challenge is to adapt our business models to deal with the smartphone society. Although there are plenty of customers who prefer to deal with their provider offline, I anticipate that for the most successful companies, whether upstream on the insurance value chain or downstream, going almost fully digital will be a prerequisite to success.

Thanks to cost efficiency and generational reasons, all our business will eventually be conducted online. However, I think that even digitization may go the way of other technologies as the technology that supports voice interaction gains in sophistication and application.

What is clear is that balancing costs with service is a hugely difficult challenge. Chief Executives have the unenviable task of making big bets on technology provision, only to find that things have moved on by the time the investment has been made, as customers decide they want to deal with service providers in different ways.

Q A

What new or emerging technologies will have the biggest impact on motor insurance?

Driverless vehicles. Without a doubt that will be the single biggest advancement in not only motor insurance, but the industry as a whole. The fact that it will happen in my lifetime and the possibility that my children could potentially never need to pass a driving test is still astonishing to me.

What are the biggest challenges facing the industry over the next few years?

The MoJ reforms to personal injury clearly represent a clear and present danger to the claimant sector, not least because, unless the government is made to see sense, RTA specialists across the UK will go out of business. Capital Economics has calculated that 44,000 jobs in legal services and their suppliers will be at risk, and the government will lose over £900m in annual revenue. The consequences for regional economies, such as in the North West, could be devastating. Politicians (at least blue-coloured ones) may talk tough about removing red tape and freeing up commerce,

March 2017

There are people who try and game the system, of course, and they need to be prosecuted through to conviction, but don’t believe the spin. Most people are honest 2018 & Beyond Supplement 07

INTERVIEW

We recognise that some reform is required, and I would argue that the claimant sector has perhaps waited too long before being prepared to countenance the sorts of changes that really should have been implemented a number of years ago Elon Musk has been a vocal champion of autonomous travel with Tesla, but there are also other big names that are working hard to drive this forward, such as Land Rover, Nissan and Peugeot, that prove that this is more than just a passing craze.

Regardless of how driverless technology is implemented, the requirement for insurance will always be there, although how this will play out is still an unknown, especially considering that some laws require a person to be in charge of the vehicle at all times (Uber in Pittsburgh being the biggest example).

Other technologies that are currently making an impact, albeit a comparatively small one, are telematics and dash cams. If you’re searching for a true combatant in the fight against motor fraud, look no further. Removing the time that is wasted through determining fault and being able to accurately identify low-velocity impact claims could potentially save the insurance industry millions, without removing anyone’s rights.

Q A

What role will telematics play in shaping the landscape of motor insurance?

Clarity. Telematics data in the context of reporting a claim provides clear and consistent information that not only gives peace of mind to the driver, who may be emotionally distressed, but also to the claims handler who is trying to piece together the details of the incident.

With the consistent increase in premiums over the last 10 years or so, the consumer is becoming disillusioned with the archaic way that premiums are calculated. By gaining accurate, real-time information, bespoke to the individual, underwriters can correctly price policies considering relevant risk factors.

As the technology advances, insurers can provide updates to drivers at regular intervals during their policy to update them on their driving and how it could affect their policy when the renewal comes around. This will remind policyholders that their behaviour behind the wheel is having a positive (or negative in some cases) impact on the price of their renewal.

Q A

What is the possible impact of ‘third party capture’, on a claim?

In its current guise, it shouldn’t change too much, despite thoughts to the contrary. While dash cams and telematics will provide clear information about the incident and liability, there is still an element of distrust around third party capture. The historical aim has been to settle claims as quickly as possible while keeping costs down. The problem arises when you’re dealing with an individual who has previously been ‘burnt’ by this method and, as such, has developed an inherent distrust of the process.

Also, with the rise in nuisance calls around personal injury claims you can forgive third parties for being a little dubious. The inclusion of real-time data and factually accurate information helps to put the third party at ease and provides an air of authority that you are the right people to help. Speed, quality and cost effective repairs should be at the forefront of every claim, whether it be third party capture or not. Unfortunately, some providers forget about the quality aspect and focus instead on ‘quick and cheap’.

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Q A

What measures should be taken over the next year to combat fraud in the industry?

Fraud has been consistently over-egged by the insurance industry in order to support their lobbying efforts. The ABI lumps together ‘suspected’ fraud with ‘proven’ fraud to arrive at a figure of £50 cost of fraud per policy, but this is plainly bunkum.

Under ABI definitions, suspected fraud occurs where a claims handler, if they believe there to be something untoward, challenges the applicant to clarify key information or provide additional information or documentation. The claim is then badged fraudulent and continues to be defined as such if the claimant subsequently withdraws the application, fails to provide documents or ceases communication with the insurer. If a claim is repudiated (for example a household claim for storm damage to a fence which was not covered by the policy), this is suspected fraud. Plainly ridiculous, especially when we understand that insurers pay out 99% of claims.

There are people who try and game the system, of course, and they need to be prosecuted through to conviction, but don’t believe the spin. Most people are honest.

Q A

What effect would the Alternative Claims Framework (ACF) have on access to justice for claimants?

I believe the Alternative Claims Framework (ACF) is the best approach to reform because all parties gain from it. The rights of redress for genuinely injured people are maintained, but the incidence of claims reduces significantly, as claimant companies won’t get their costs. Law firms can continue to represent their clients and ensure equality of arms in the courts between claimant and defendant. Beefed up regulation will eliminate cold callers, unscrupulous claims management companies and other ‘fast buck’ merchants, while government can focus on more important matters (like the future of the UK after Brexit) without wasting time creating legislation that puts thousands of people doing a good job for customers in their hour of need out of work. And of course, by banning pre-med offers, claimants will get the level of compensation merited by their injuries, as opposed to a sub-scale amount that suits the insurers.

Q A

How will the ACF reduce cold calling and claims farming?

I share the view of the vast proportion of the population. Cold calling and claims farming is a plague and should be banned.

There is wide agreement that the government must accelerate the Brady report recommendations and move regulation of CMCs to the FCA as soon as possible. A ban on cold calling is hard, because many of these businesses are based offshore, but removing legal fees for claims lodged with the CRU after 12 months will remove the incentive for many of these companies to trawl the market for old claims. Older readers will remember the movie All the President’s Men, in which a source (Deep Throat) advises the journalists investigating the Watergate Break in to ‘follow the money.’ That advice is good advice for dealing with the shadier elements of the claims sector.

Q A

Why should the recent PI reforms be limited to road traffic accident claims only?

To be clear, I don’t believe the government’s proposed personal injury reforms are the right approach, full stop. The

March 2017

INTERVIEW

To be clear, I don’t believe the government’s proposed personal injury reforms are the right approach, full stop. The government view […] is that there is an epidemic of whiplash claims. In fact, the incidence has fallen in recent years government view, encouraged by the insurance industry, is that there is an epidemic of whiplash claims. In fact, the incidence has fallen in recent years. The ABI’s own data shows that, after accounting for inflation, the total amount they paid out on what they describe as ‘whiplash’ or soft tissue injury claims declined by seventeen per cent between 2007 and 2016. Over the same period, official statistics suggest that premiums increased by an average of 72 per cent.

We recognise that some reform is required, and I would argue that the claimant sector has perhaps waited too long before being prepared to countenance the sorts of changes that really should have been implemented a number of years ago. Some of our critics in government have argued that the ACF exists only as a result of the government bringing forward its reform programme.

There is undoubtedly an element of truth in this, but the ACF still represents the best approach, and on the RTA elements promotes a significant but realistic set of proposals to manage down the incidence of RTAs while respecting the rights of genuine claimants.

The government’s proposals have no respect for principles of tort that have existed for centuries.

Insurers have lobbied to include EL and PL in the reform programme, but these claims represent less than 10% of the annual total. They are clearly not the major target in the government’s gun sights, and we strongly believe that the citizens’ legal rights in respect of EL and PL should be upheld.

Q A

What goals are MSL and FLI working towards over the next year?

MSL and FLI have been described as one of the best-kept secrets in the claims sector, and we are committed to playing a more vocal role in the sector, building on our business success to enhance our profile, brand and standing in the market. Our longterm aim is to double the size of MSL & FLI by 2020, via organic growth. This financial year we are currently delivering over £14m of GWP across our five divisions, and £1m EBIT. Our expectation is to reach £28m in 2020, with a significant uplift in margin and EBIT. We have considered acquisitions but at present they are not part of our strategy. Instead, we are seeking to grow primarily in legal expenses and assistance (MSL & FLI), and in full service motor claims (MSL). Our other trading divisions, MSL Vehicle Solutions and Opsium (employer support services) are also expected to make a greater contribution. In practical terms, this year will see MSL rebrand. We are bringing on board a new managing director, and intend to deliver around £2m in new business wins. Target sectors include niche (driving instructor, taxi, bike and fleet), MGAs, insurers and fleet business. For FLI, we have just launched our new clinical negligence ATE product, and continue to grow on the back of a highly successful year in 2016.

It is an exciting and rewarding time to be running a business in what is a challenging sector, encompassing both legal expenses and claims management in the motor space. We are at the heart of a host of issues to be managed that directly impact the lives and well-being of our customers.

March 2017

Nick Garner Nick is the Chief Executive Officer of MSL and Financial and Legal Insurance. Having qualified as an accountant with PwC in 2003, Nick joined MSL as a group accountant, eventually working his way up to the executive team and managing director in 2006.

MSL and Financial and Legal form part of an independent collective, Drive Further, whose mission is to go further to understand their customers’ needs, supporting them through continuous investment in their people and processes.

Through innovative products and fantastic service, they aim to drive away stress and instil confidence in their customers.

Nick is passionate about the financial and legal sectors and sits on the executive committee for The Credit Hire Organisation (CHO) and more recently Access to Justice (A2J), which has been established to promote the interests of the personal injury sector and legal profession.

Nick is married with two young boys who provide endless hours of entertainment and a never-ending sense of pride.

Outside of the office, Nick enjoys the odd round of golf, when time permits, and is a big sports fan, following cricket, golf and football.

The insurance industry has a profound focus on reducing costs, and that is threatening to change the nature of insurance itself.

Motor insurance is compulsory, but it is bought to protect individuals from the cost of injury, whether catastrophic or a soft tissue injury that puts them off work for a week or two. However, insurers are making it harder and harder to claim successfully for an injury, and in doing so they undermine the very premise of insurance. I think there will be some in the insurance industry who view the prospect of insurers seeking to renege on their contract with the public deeply worrying. I hope these saner voices prevail, and our industry steps back from the brink.

2018 & Beyond Supplement 09

In the last twenty years, the number of accidents in the UK has fallen considerably, as well as the number of people going to hospital, but the number of injury claims has increased significantly. That doesn’t add up

INTERVIEW

Adrian Furness Technology is evolving more quickly than ever, and it’s imperative that the insurance industry keeps up in order to maintain customer service quality, as Adrian Furness told Modern Claims when he discussed personal injury reforms, detecting fraud and customer and employee engagement.

Q

What have been some of the key changes in the industry you have seen as Claims & Operations Director, and how has your view of the industry changed since starting in the role?

A

One of the most attractive things about working in claims is the constant change and associated challenges. People talk about regulation and legislation, but actually there are a lot of other areas of change.

I would say one of the biggest changes I’ve seen is the increase in the external manipulation of the claims process. In the last twenty years, the number of accidents in the UK has fallen considerably, as well as the number of people going to hospital, but the number of injury claims has increased - significantly. That doesn’t add up.

And it’s only in the UK, this doesn’t happen anywhere else. If you ask the average person, they will tell you they are fed up of the compensation culture. They want something done about it.

The customers’ expectations and demands have also changed. In a culture of instant service, customers are judging their insurer against Amazon, or against going shopping in Marks & Spencer, for example.

This presents a massive challenge and one that will continue to grow as we work to meet and exceed our customers’ expectations.

Technology is changing significantly. When I started in the industry, I went to work and I got a computer; I’d never seen those before! Now, the technology my nine year old uses is more advanced than what most of us have on our desks! We, as an industry, need to ensure we continue to innovate to ensure our products and services maximise the benefits of these technologies to improve customer service.

Q A

What are the biggest challenges facing Covéa in the next five years, and how will it meet these?

One of the biggest challenges for an insurer is retaining profitability in a very competitive market. Most insurance policies are sold on price, that’s the reality of it. You try to keep your prices competitive for lots of reasons, but if your competitors don’t follow suit, you lose business. That means margins are very small. Typically, you’re looking at between ten and twenty percent return on capital of what’s invested. It’s about making sure you understand what you’re good at and taking a longer-term view, not just the next twelve-months. There’s also the minefield of injury reform, what it means and trying to manage it to stay ahead of the game.

March 2017

Another challenge is the recognition that customers are using technology that we don’t currently use, and that they want to interact in ways that we haven’t really done before in the industry.

Why can’t you video a leak in your house and show it to us, and then talk to us there and then? Our answer is that, yes, customers should be able to do this. So we’re looking at the capabilities of being able to communicate with customers, right at the point they need us, in a way that’s suitable to them.

Put simply, we should know our customers better; you talk about the fraud risk, but what if you know your customer really well and you can build a proposition based on trust? If you have that, then you can really let the customer drive the process. We’re working through some of these considerations and building them in at the forefront of our offering.

Q

What effect will the Ministry of Justice’s personal injury reforms and the reduction in discount rate have on the claims sector?

A

The devil’s in the detail and there will be some unforeseen consequences. We should see injury frequencies reduce, not because people can’t find a way to get compensated or get their injury rectified, but because the incentive won’t be there. Referral fees were banned, and a lot of very clever solicitors found ways to get around the ban, but the incentives were still there so people continued to be encouraged to make claims. It’s why this change is needed.

The idea that the whole industry can develop joint solutions without reform is unrealistic

2018 & Beyond Supplement 11

INTERVIEW

Put simply, we should know our customers better; you talk about the fraud risk, but what if you know your customer really well and you can build a proposition based on trust?

Insurers have been paying out more and more on injury claims, and there’s a direct correlation between that and the premium people pay. All things being equal, the reforms will be positive for controlling premium rises.

The discount rate counteracts this. A reduction in the discount rate is inevitably going to put premiums up now. Does that mean the reduction in discount rate was wrong? I don’t believe it should have been left as it was; the rate hasn’t moved for so many years so it’s right to be reviewed (albeit there is a lot of debate to be had about what the most suitable rate should be).

However, we have to accept that most customers will have to pay higher premiums as a result.

Q A

How will fraud continue to evolve in the coming years, and what is Covéa doing to combat this?

There is a lot of fraud, and we see it every day. Both opportunistic and organised fraud have evolved, and fraudsters constantly seek new ways to try and outsmart the industry, but insurers are a lot better at spotting trends quickly and acting to combat these trends.

Technology is a pro and a con. If you’re going to build different systems and let customers interact in different ways, you have to be robust around the risks of that. On the other hand, as we get to know our customers better, we get to use analytics more effectively and we’ll be able to detect fraud a lot earlier.

Q

Are there challenges or opportunities currently present in Covéa’s international markets that the UK industry could learn from?

A

We’re part of a French group who are international, and we act as a standalone business within that. We share information and knowledge, particularly around technology and digitalisation. We’ve worked together on technology to deal with things like flood and storm risk, and they’ve got some great capability around that. We have piloted this in the UK, because it’s predictive and it gives us a great opportunity to warn customers about severe weather events in advance, often better than weather forecasts can.

When I started in the industry, I went to work and I got a computer; I’d never seen those before! Now, the technology my nine year old uses is more advanced than what most of us have on our desks!

12 2018 & Beyond Supplement

The fraud challenge is far greater in the UK than anywhere else in our international businesses. Our European colleagues are massively interested in the frequency and cost of both fraud and injury claims generally and the dynamics of what happens here; the word they use is ’incroyable’. They just find it absurd.

Q A

What is Covéa doing to build on partnerships and relationships with the different parties involved in the claims process?

We like to take a very long-term view with our partners, and we like them to be people who share our kinds of philosophies, understand our business model and understand our aims. I don’t want to build relationships with people purely based on price; I want to build them based on outcomes and solutions.

The claims market is quite antagonistic, and outside of your own business relationships it’s adversarial. The whole system is currently designed to make it this way, which can make it very difficult to build relationships. We have some very good relationships with claimant solicitors, but currently the whole process is designed around the profits people can make out of the claim, rather than the interests of the customer, which is why I’m a great supporter of reform. The idea that the whole industry can develop joint solutions without reform is unrealistic.

Q

How will changing consumer expectations towards customer service and the products they buy affect the way insurance is marketed, structured and sold?

A

Insurance is a pot that everybody pays into, and people say that kind of structure won’t change. I don’t quite buy into that; some people are starting to purchase pay as you go insurance, for example. Since that’s inevitably what customers will want, we have to work out financial models that make that feasible. Fundamentally, there’s a lot of change, but it all revolves around customer choice.

Social media for marketing of insurance is important, but so is interacting with customers; I have friends who only have Twitter because they say it’s the quickest way to get a response if something’s wrong. It’s so powerful because it’s visible to everybody.

Q

Is there a danger of a skills shortage in the insurance industry, and how can companies attract employees from the millennial workforce?

A

Within Covéa Insurance, I believe the skills we have now are greater than they were when I joined the industry twenty years ago. We invest a lot more time in training, in developing empowered teams and in assessing skills in customer interaction than the industry traditionally did. We have a diverse workforce; it needs to be, as customers are diverse. We aim to provide opportunities, skills and abilities to shine.

We need to truly embrace the millennial workforce and offer them a career that gives them maximum opportunities to grow and develop. We recruited over one hundred people to our claims department last year, and most of them fit the millennial profile.

We’re a large employer of A level students and graduates, and we run an apprentice scheme that takes seventeen/eighteen year olds in large numbers into our business. It’s all about giving them

March 2017

INTERVIEW

We’ve moved away from hiding behind policy wording, small print and from keeping the customer in the dark, to a culture where people are genuinely trying to put themselves in the customer’s shoes the skills needed in this industry, but we actually learn a lot from them in return, because they’re already experts in the kind of technologies we want to look at.

In addition, they challenge our ingrained practices, processes and wordings. For example our policy documentation: “why do you call it premium, why don’t you just call it the price?” Well, we’ve never really thought of that, good question! We’ve moved away from hiding behind policy wording, small print and from keeping the customer in the dark, to a culture where people are genuinely trying to put themselves in the customer’s shoes. I’m very proud that we really embrace that.

We recently had an open day for an apprentice scheme in Halifax, and nearly 250 people turned up; we just put it on social media.

People are interested as long as you don’t say it’s “just insurance”.

Explain what it is; it’s customer solutions, it’s interactive, it’s ever changing and it’s fast paced.

Q A

What technological opportunities will Covéa seek to take advantage of in the next few years?

We’re going to look at how we interact with customers. If they have an accident, they could book their car for repair, order a replacement vehicle, receive settlement and discuss their claim via multiple channels, whether that’s on an app or whether customers want to phone us, Tweet us or Skype us. That’s where we want to be, and we’re opening that technology up to give customers greater control over how they want to proceed with their claim.

We will also be looking at new technologies, like automation of some non value-adding processes. It’s not going to replace jobs, but it’s going improve some background processes that get in the way, giving our people the opportunity to further develop.

Adrian Furness Adrian was appointed Claims & Operations Director in October 2016, having previously held the role of Claims Director for Covéa Insurance since October 2012. Adrian has responsibility for all aspects of service delivery, claims management, IT, Electronic Trading, Business Change Management and Facilities Management. Adrian’s remit also includes responsibility for HR & Learning.

Prior to the formation of Covéa Insurance, Adrian was Operations Director for Provident Insurance. Adrian joined Provident Insurance in June 1995 and undertook a variety of claims and customer service management roles, before being appointed as Operations Director in 2008.

Adrian has worked in the insurance industry for over 25 years, having previously worked in a variety of claims management roles for both AGF and Endsleigh.

Adrian has a History and Politics degree from Manchester University and an MBA from Bradford University.

March 2017

2018 & Beyond Supplement 13

The reforms will leave about 70% of people either representing themselves, being put off making a claim, or paying for legal advice in claims where effectively whatever they’ve recovered in compensation is paid back in legal costs, resulting in inadequate compensation

INTERVIEW

Duncan Dollimore While a lot of discussion has centred around the impact of personal injury reforms on drivers, Duncan Dollimore argues that cyclists have been overlooked and that they will also be greatly affected, as he explains to Modern Claims.

Q A

How do cycling personal injury claims differ from motor personal injury claims in terms of injury type and value?

70% of cyclist personal injury claims are under £5000, so we know there are a huge amount of them that fall into what some would describe as ‘minor’. I’d put it differently: they’re meaningful injuries, but they’re not life changing. They’re going to be affected by the proposed increase in the small claims limit. An awful lot of these injuries are things like fractures, broken collar bones, broken wrists; the general injuries that you would get from a collision.

Interestingly, the reforms were proposed due to concerns regarding whiplash. Whiplash claims for cyclists are like hen’s teeth; it is possible to imagine a scenario where somebody goes over the bonnet of a car and ends up with a whiplash injury, but when I’ve spoken to cycling personal injury lawyers, they can’t remember dealing with a claim that’s involved whiplash.

In terms of the nature of the claims, we haven’t been able to put a percentage figure on anything, but every single personal injury lawyer that I’ve spoken to that deals with cycling and pedestrian claims tells me that they are contested more than motor claims.

That’s because you have more issues raised, either in terms of liability or contributory negligence. So with cycling cases, you have insurers and defendant solicitors raising issues in relation to whether the cyclist was filtering through traffic, whether they were wearing high visibility clothing, and whether any of this has an impact in terms of contributory negligence.

Q A

What impact will the PI reforms have on access to justice for injured cyclists?

They will leave about 70% of people either representing themselves, being put off making a claim, or paying for legal advice in claims where effectively whatever they’ve recovered in compensation is paid back in legal costs, resulting in inadequate compensation. This is a very poor road safety message for the Government to present.

that it is therefore insignificant or of no consequence. That’s not a great message to send out in terms of the implications and consequences of careless or negligent driving.

Q A

Do you believe cyclists have enough of a voice in the claims sector about the changes it is currently undergoing?

To be fair, we’ve had huge support since the Ministry of Justice announced this consultation, particularly from the claims sector. Access To Justice, for example, has made a lot of noise against the consultation since it was launched. Perhaps there’s an argument that we didn’t do as much prior to the consultation being launched, and part of that is because the government has been focusing so much on whiplash. That’s what the consultation is supposed to deal with, but within that is the small claims limit increase. I think there was a thought that this aspect of it was going to go away.

But over the last two months, we’ve had a lot of support from the claims industry, in relation to sending out the message of what the implications of these reforms could be.

The Highway Code is technically reviewed every six or seven years, but it hasn’t been reviewed for nine years now […] It’s about time they looked at it again, not just because of the increasing move towards automated vehicles

In December 2015, the government published their British Road Safety Statement, with all sorts of promises of how they were going to improve road safety. But the message that they’re saying is that, for any pedestrian or cyclist that’s been injured in a collision where it’s a sub-£5000 claim, this is a small claim, and

March 2017

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INTERVIEW

It is possible to imagine a scenario where somebody goes over the bonnet of a car and ends up with a whiplash injury, but when I’ve spoken to cycling personal injury lawyers, they can’t remember dealing with a claim that’s involved whiplash

Q

Do you feel the government gives enough consideration to cyclists in its approach to the claims sector, and also in other discussions that may impact cyclists?

A

It’s given absolutely no consideration to the impact of the reforms on cycling claims. I don’t think they’ve understood the implications, or even thought them through. They’ve published a consultation that talks about whiplash reform, when buried in the middle of it is something with much broader implications: the change to the small claims limit.

I don’t think they’ve given any consideration at all to how this impacts on things that are not relevant to their supposed concerns with whiplash claims.

There has been, in terms of the broader issue of the government considering the impact on cyclists, progress with road safety. We’re lobbying them with those other matters. But they haven’t joined the dots at all in relation to this whiplash reform, and what it will mean to certain classes of claimant, including vulnerable road users.

Q

How is the psychological trauma caused in a collision different for cyclists, and how might the reforms effect the ability for a cyclist to bring a psychological trauma claim?

A

There’s been quite a bit of research by Dr Rachel Aldred at Westminster University, in relation to what she calls ‘near misses’ or ‘close passes’, and she identifies how people can be put off cycling, not just because of a collision, but because of aggressive driving near them.

People can be put off by the driving that they experience when they’re riding their bikes, even more so if they’re involved in a collision. We regularly speak to people who, following a collision, are wary or nervous about getting back on their bikes. It can impact upon people getting back into cycling.

The government might think that’s a minor issue, but if you’ve got a mobility issue and you use an adapted cycle, because you can’t drive, nervousness about cycling could actually restrict your mobility. If you’re a 73 year old cyclist who uses a bike to get into the local village, and that is your sole form of independent transport, being so affected by a collision that you can’t get back on the bike has a potentially serious impact on your life and the way that you do things in your later years.

The government thinks this is worth about £25; that seems to be their approach to somebody whose independence and mobility is potentially restricted because of how affected they are by a collision.

Q A

If the members of parliament who were speaking in favour of these reforms were misled, then it’s no surprise that the general public has been too. We really wanted to highlight that this was something of real consequence to people, and not something that was just about fraudulent whiplash claims, as the government seems to be suggesting.

We also wanted to highlight that this was about victims. Much of the language that the government has used has been on the subject of fraud and exaggerated claims. It’s quite unpleasant to think of that in terms of people who are victims of a crime or dangerous/ negligent driving, people with real injuries who are being bracketed in a category of fraudulent claimants. That’s not how we, as a society, should be talking about or responding to people with genuine claims, in relation to compensation for somebody else’s negligence.

Q A

Is there a significant volume of fraud in cycling PI claims, and what can be done to combat any fraud that does exist?

I can’t think of any examples of fraud in cycling personal injury claims. The reason for that is because the injuries sustained are very susceptible to having clear medical evidence pertaining to whether they exist or not. Lots of the injuries involve a broken bone, for example, so there will be an X-ray and a fairly straightforward medical report to show this. They’re not injuries that have the evidential difficulties that some whiplash claims do.

In terms of the actual evidence about what happened, you’re going to have somebody who is reporting the incident. The only potential fraudulent claim could be the report of a pothole accident, where somebody could have an injury because they’ve hit one pothole, but they then take a photograph of a different pothole.

Q A

Do you believe insurance should be compulsory for cyclists, and could it improve access to justice?

We don’t believe that insurance should be compulsory for cyclists. People who are members of cycling groups like Cycling UK or British Cycling will have insurance through their membership. Because they are members of such organisations, they are, by definition, people who cycle quite regularly.

The problem with making insurance compulsory for everybody who cycles is that it will put a lot of people off from ever getting on a bike. Your eight year old can’t just hop on their mate’s bike and go to the park for a ride, because they haven’t got insurance.

If you go on holiday with your family and you decide that you all want to have a ride on one of the National Cycle Network quiet routes, you can’t do that. You can’t hire a bike from the local bike shop, because you haven’t got any insurance.

What were the aims of Cycling UK’s Road Victims are Real Victims campaign, and how has the response been so far?

We wanted to highlight to our members, supporters and other related groups, what the implications and consequences of the reforms were. It was very interesting when there was a recent debate at Westminster Hall on the 6th January, and two Conservative MPs had no idea about what the reforms covered.

They seemed to think that they were speaking in favour of reforms that only impacted on motorists’ whiplash claims. They had no idea that the breadth and extent of these changes would exceed what they were talking about.

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If the members of parliament who were speaking in favour of these reforms were misled, then it’s no surprise that the general public has been too March 2017

INTERVIEW

People can be put off by the driving that they experience when they’re riding their bikes, even more so if they’re involved in a collision We know, from other areas of the world, that where people start passing legislation to make things compulsory within cycling, it puts a lot of people off cycling. That’s a very important issue when you’re encouraging teenagers and other people to lead more active lives and you’re trying to deal with wider issues, such as obesity. Making insurance compulsory will have numerous downsides, because it prevents that situation where people are encouraged to start cycling.

Q A

Is there still more that can be done to educate drivers and cyclists about road safety, and where does this responsibility lie?

There’s always more to be done, and the responsibility extends from the Government (through things like their THINK! campaign) down through organisations such as ourselves, as well as other road safety organisations.

We’ve been trying to work more closely with motoring organisations on joint messages. We’ve worked with the AA recently, on issues to do with distracted driving, and also in relation to effectively lobbying in terms of disqualifying drivers, and making sure that there’s more consideration given to whether they should be keeping their licenses. This has implications in terms of insurance premiums of compliant and safe drivers, and in relation to the overall safety of all drivers.

There is a move to combine some of those safety messages cross-sector, rather than have the ‘Them and Us’ debate that has sometimes been the situation.

We were less than impressed with the last Government THINK! campaign, in relation to lorry safety issues. This was their ‘Hang Back’ initiative, in which they included some very graphic images.

They didn’t consult with wider groups like ours about how they packaged and sent their message, so there ended up being an element of victim blaming.

There has to be greater cooperation with all sectors when people are planning road safety campaigns and messages. That means consulting with victims’ charities, pedestrian groups, and cycling groups, to ensure that there’s a consistent message with no attempt being made to blame people. We often find comments being made in relation to collisions and pedestrians, where people will mention that the pedestrian was wearing dark clothing – that’s not an excuse for a driver not seeing somebody who is crossing the road in front of them during the day.

Q A

What will Cycling UK be doing over the next year to improve safety for cyclists and other road users?

I recently gave evidence about cycling and the justice system, and among the issues that we touched upon were issues relating to cycling safety, and a review of the Highway Code. The Highway Code is typically reviewed every six or seven years, but it hasn’t been reviewed for nine years now. We’ve been pressing the Government for some time because of this. It’s about time they looked at it again, not just because of the increasing move towards automated vehicles.

One thing that could improve is the advice regarding passing distances. West Midlands police have run a fantastic initiative in relation to that, where they’ve been targeting close passing of

March 2017

Duncan Dollimore Duncan is the Senior Road Safety and Legal Campaigner at Cycling UK, the national cycling charity, and heads the charity’s Road Justice campaign, which deals with both civil and criminal justice issues which affect people who cycle.

After the government opened the consultation on reforms to the soft tissue claims process, Duncan launched Cycling UK’s ‘Road Victims are Real Victims’ campaign, jointly with the national road crash victim charity RoadPeace, and the national charity for everyday walking, Living Streets. Over 6000 people responded and wrote to the government opposing the increase in the small claims limit, highlighting the implications for both cyclists and pedestrians.

Duncan has an understanding of these issues through his current campaign and lobbying role with Cycling UK, as a lifelong cyclist, and having previously worked as a solicitor in general practice.

drivers, but it’s something that people overlook, or they forget about it because they haven’t looked at the Highway Code recently.

Some simple and straightforward amendments can be made concerning car doors. There are 600 injuries a year to cyclists caused by drivers opening their car doors, and even some deaths. Other countries have dealt with this by using the ‘Dutch Reach’, where motorists are trained to open car doors with their opposing hand, rather than the one that’s closest to the door.

This costs nothing, but it will have a dramatic impact on car dooring incidents.

2018 & Beyond Supplement 17

A minimum fixed number of lessons could go a long way towards ingraining the right behaviours in young drivers

INTERVIEW

Symon Weedon Driving instructors and pupils are a niche group of road users who could also be effected by proposed reforms and other legislative and societal changes, as Symon Weedon explained to Modern Claims.

Q A

What have been some of the key changes in driving tuition and instructor insurance in the past decade?

Waveney entered the driving instructor insurance market in 2004, and the proposition was to provide driving instructors with a fully comprehensive insurance policy that covered them to provide tuition to learner drivers, predominantly under 21s. The market has evolved to cover a wider range of additional covers as the Driving Vehicle Standards Agency (DVSA) has brought in changes to the way it licences its drivers to use the road, and to keep up with legislation.

Legislation changed due to the Corporate Manslaughter Act 2007, which made companies responsible for their drivers’ actions and made them open to claims from local authorities where it could not be evidenced that the directors of companies had carried out appropriate training, validation and recording of driver histories and records. There was then a need to provide comprehensive driving insurance to other cars under the tuition policies to allow instructors to be comprehensively insured in any vehicle that they provide the demonstration drive in.

So now directors of companies are responsible for due diligence of their drivers, training them and validating that they have the correct licence. Their cars are a tool of trade, and they need to make sure an employee knows how to use them; you can’t assume anymore.

The need for a replacement vehicle following a claim has also changed significantly; the insurers’ standard provision of a courtesy car is no longer sufficient to meet the needs of a driving instructor. Like any business, the instructor relies on their tools of trade to continue working. We have moved from providing a standard replacement car to using an Accident Management company in MSL, who provide our instructors with a dual control replacement vehicle, regardless of fault. For an unlimited period this same policy has recently been made to provide cover for vehicle cloning, something that is happening more and more over the last few years.

Q A

tests to incorporate new challenges that the next generation of drivers is likely to face.

Drivers will be required to drive on roads with higher speed limits to make them feel comfortable driving on single and dual carriageways. Currently, drivers have an optional Pass Plus course they can undertake once they have passed their test. The new changes will effectively provide a greater level of ability across all road types.

52% of drivers now have Sat Nav. Learners will need to follow directions from a Sat Nav during the test to showcase their ability to obey instructions. Sat Navs were previously banned from driving tests, so it’s a testament to the integration of technology in vehicles that they are now seen as paramount to a driver’s knowledge and skillset.

The dreaded reverse around a corner manoeuvre has now been removed in favour of more lifelike scenarios, such as driving into a parking bay and reversing out again; considering how many individuals reverse out of a parking bay without looking at my local Tesco, this change is long overdue!

In the last eighteen months, pupils have flocked back to the schools as levels of unemployment have been at their lowest levels for a number of years

How has the driving examination process changed to reflect modern driving conditions and behaviours?

With the emergence of automotive driving and reliance on satellite navigation, the DVSA has decided to shake up driving

March 2017

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INTERVIEW

Driving yourself may one day be left as something to only be enjoyed by classic car owners wanting to seek the thrill of driving their own car During the test, drivers will be asked to follow road signs or instructions from the examiner to get to a location. This section would usually last for about 10 minutes, but under the new changes the driver will be required to drive independently for 20 minutes (with prior guidance from the examiner).

Previously, a “show me, tell me” portion of the test would take place while the vehicle is stationary, but under the new rules the driver will be asked while the vehicle is in motion. Presumably this will prepare drivers for when they have children and they are asking inane questions throughout the journey.

Changing the format of the test will allow more types of road to be included in the driving test route, like motorways.

Q A

What risks need to be assessed in a driving instructor policy that are not present in standard motor policies?

Like with most motor policies, we ask a standard set of motor insurance questions, but to really understand the risk we have adapted our question set to enable us to differentiate our rating, like any other niche provider. These range from questions on the instructor’s grade to use of the vehicle for additional occupations based on hours used for each occupation.

Q A

What complications can arise in motor accident claims involving a driving instructor and their pupil?

Driving instructors have a unique aspect to their personal injury claims. The law stipulates that due to the instructor and the pupil being equally in control of the vehicle, each has a duty of care to the other. Typical policy wording is a follows: “It is agreed that the driving instructor motor insurance policy is extended to insure you and any instructor engaged by you to whom you have provided a vehicle which is insured under this policy, for your/their legal liability to pupils whilst driving instruction is being provided”.

Q A

How would the Ministry of Justice’s proposed reforms impact on driving instructor claims?

The proposed reforms could have a large impact on personal injury claims for driving instructors as a significant demographic of road user. Driving instructors are susceptible to being hit in the rear, due to the nature of their occupation.

When young drivers are under driving school conditions, accidents tend to be low speed, low impact, and tend to happen on roundabouts, t-junctions, estates and all the places where they’re trying to learn to drive on the road. I’ve seen a number of dash-cam footages for claims from driving schools, and a large proportion of driving instructor claims are non-fault, caused by other impatient road users looking to get past the learner driver, or driving too close and not expecting the learner to brake. These behaviours invariably end in a rear hit, with both the instructor and pupil suffering from whiplash.

We’re all used to driving at shorter stopping distances than the driving test requires because of ABS and modern braking. You can’t rely on that when behind a learner driver, because you can’t predict what they’re going to do. We get far more non-fault claims than we do fault, and the reforms could impact all of these claims.

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Q A

How would the reforms affect different types of drivers, and drivers of different types of vehicle?

We do have a lot of different types of driver and vehicle on cover, including one decommissioned tank! But as an insurance broker we rely on the insurer’s view of the data to analyse who this affects, and the claims and loss ratios of insurers, who in turn increase or decrease rate based on this information.

Motorcyclists may be significantly disadvantaged, because they’re a lot more vulnerable and unprotected than somebody with half a ton of metal around them; their injuries are a lot more significant than somebody hit from behind at 30mph in a car.

Q A

Is there a significant volume of fraud in driving instructor insurance, and what is being done to combat this?

There is not a huge amount of fraudulent claims within the driving instructor insurance space. Instructors are typically the innocent party in a rear end shunt, which are caused by a driver behind who is driving too closely or too quickly to be able to take appropriate action following the braking behaviours of a new driver.

We do see the odd cash for crash as a pupil at the wheel of a car may be seen as a soft target for a car swerving late to exit a side junction, seemingly innocently slamming on their brakes so that the pupil has no time to brake and runs into the back of the swerving vehicle.

Q A

What is the government currently doing to improve driver education and safety, and is there more that can be done?

I would like to see a major overhaul of the driving test. It’s currently too easy to pass your test on a few driving lessons, then be driving down the seafront in a souped up hatchback with four of your mates, showing off your new found confidence on the road to other road users.

A system similar to the one used in Sweden may make a much better option, with defined amounts of lessons and restrictions on passengers. It comprises of a one-year “learner stage”, beginning at 17, during which drivers have to total at least 100 hours of daytime and 20 hours of night-time practice under supervision.

Learners can then take their test at 18 and, if they pass, will get a probationary licence. During the probationary period, drivers will

The need for a replacement vehicle following a claim has also changed significantly; the insurers’ standard provision of a courtesy car is no longer sufficient to meet the needs of a driving instructor

March 2017

INTERVIEW

With the emergence of automotive driving and reliance on satellite navigation, the DVSA has decided to shake up driving tests to incorporate new challenges that the next generation of drivers is likely to face have a curfew and under 30s will be banned from carrying any passengers who are also under 30.

I think this system could be adopted in the UK to stop bad behaviour in young drivers, normally young males showing off to their mates. A minimum fixed number of lessons could go a long way towards ingraining the right behaviours in young drivers.

Q

It has been suggested that fewer millennials are gaining driving licenses. Do you believe this to be the case, and if so, to what do you attribute this?

A

We have actually seen an increase in young drivers taking the test during the financial crisis; parents who support the costs of their children learning to drive found it difficult to find the extra money needed to pay for these lessons. In the last eighteen months, pupils have flocked back to the schools as levels of unemployment have been at their lowest levels for a number of years.

Q A

What role will ADAS and, ultimately, autonomous technology play in driving tuition?

ADAS is already here, although it only provides partial autonomous control of the vehicle. It used to be the selling point on luxury high-end vehicles, but even small hatchbacks now come with autonomous electric braking or parallel parking features.

I’ve heard that fully autonomous vehicles on our roads are probably still a decade away, but if the manufacturers get the technology and the marketing right then who wouldn’t want a fully electric, autonomous vehicle on their drive? Driving yourself may one day be left as something to only be enjoyed by classic car owners wanting to seek the thrill of driving their own car.

In terms of tuition, you still need to be able to take your vehicle over; so even if you’re in an autonomous vehicle, the implication is you still need to pass your test. So I don’t think it will change the volume of driving instructors and pupils, since there will be just as many, if not more, vehicles on the road, and drivers will need to know what to do when they have to take action.

Q A

Symon Weedon Symon is the Schemes Director for Waveney Group Schemes, part of the Towergate Group, the UK’s largest provider of driving instructor insurance with a circa 50% market share.

He is dedicated to providing innovative covers and products to market to protect his clients.

Symon has spoken at the broking in the motor revolution event at the Royal College of Physicians in London and was a Speaker for the Approved Driving Instructor National Joint Council.

Waveney are multi-award winning, having won awards for the favourite service provider to the driving instructor industry in 2014, 2015 and 2016.

Symon has recently taken on an additional challenge by becoming the schemes Director for Towergate Licensed Trade.

How else do you predict driving tuition and instructor insurance will change in the next few years?

I can see the instructor insurance being around for a while. In all areas that are squeezed by the AI phenomena, there are always other areas that open up. For example, will motorcycles become fully autonomous, and how will that affect motorcycles tuition? They probably won’t; you buy a motorcycle for the thrill of the ride!

Even if the standard car should become fully autonomous, it will require a person to be able to take over the vehicle, which will require a driving licence, just like now.

March 2017

2018 & Beyond Supplement 21

All roads lead to claims in the new 2017 BIBA Manifesto The British Insurance Brokers’ Association has released its 2017 manifesto. Graeme Trudgill details the issues that brokers have brought up in the past year, and how BIBA will seek to address these in the next twelve months.

T

he BIBA manifesto is made up entirely of issues raised by our member brokers via our advisory boards, technical committees and focus groups and during the annual BIBA fifteen date tour of our regions. This year there were over 100 issues raised. It’s impossible to get them all in the Manifesto, so some of them will be carried forward in the coming Insurance Brokers Standards Committee guide to good practice. However, it was clear that claims related issues were to the fore when brokers were discussing with us what, in their opinion, were the key issues.

To get the best customer outcome it is vitally important that the placement is right at the outset, so that when a claim does occur there is no significant risk of underinsurance. Readers may recall that when the FCA concluded their thematic review, TR15/16: Handling of insurance claims for small and medium sized enterprises (SMEs), it reported that there were a significant number of instances where the sum insured was insufficient to cover the loss. In particular, they also highlighted Business Interruption (BI) cases where the loss exceeded the twelve-month indemnity period. This is why the BIBA Claims Working Group (consisting of BIBA Brokers, CILA, AIRMIC, the ABI, FOIL, Loss adjusters, Loss assessors, expert witnesses and leading insurers) insisted that the Manifesto should highlight two key points in regard to helping the customer get the correct business interruption protection. Firstly, the importance for most businesses of having, as a minimum, a two year indemnity period for BI. Secondly, where appropriate, the need to promote the importance of using declaration linked BI cover, providing an uplift of 33% of the declared sum insured, provided the estimated sums are correct to start with. Both can give significant benefits to a business and so BIBA is committed to promoting our underinsurance guide for SMEs and increase awareness of the complexities and benefits of this cover. Our Claims Working Group agreed if we could nail these two points then the claims process would allow customers to have a far better experience.

Managing the claims management companies I am told that many claims management companies (CMCs) do provide a useful role, giving assistance services to customers at their time of need. However, with £2Billion paid in whiplash claims and a whiplash rate for RTA injury claims of 80% in the UK, compared to only 3% in France, there is clearly a significant issue, not helped by the 720 million nuisance calls and texts unscrupulous operators

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With £2Billion paid in whiplash claims and a whiplash rate for RTA injury claims of 80% in the UK, compared to only 3% in France, there is clearly a significant issue, not helped by the 720 million nuisance calls and texts unscrupulous operators make, encouraging claims to be made make, encouraging claims to be made. This is why we met with Carol Brady, who led the independent review into the regulation of CMCs for Government, and why we were delighted to see in March 2016, George Osborne announce in his budget that the FCA would be put in charge of the new CMC regulatory regime. However, a year down the road there is still no sign of the Bill that will implement this change, so it is in our Manifesto and we are having strong discussions with the HM Treasury insurance team about getting the necessary legislation in place.

The increasing amount of cyber claims was a topic raised by members. SMEs might believe that they will not be a target for hackers because they are small. However, their very size may make them even more of a target because many have lower degrees of cyber security in place than large organisations, making them easier to attack. Because SMEs are also often part of a supply chain with larger firms, they can present a “back-door” into bigger organisations that are the real target, but with more sophisticated cyber security in place. The Cyber Security Breaches Survey 2016 showed that in the last 12 months, 33% of small firms, 51% of medium sized firms and 65% of larger firms had experienced a cyber security attack. This is why BIBA has set up a new Cyber

March 2017

FEATURES

SMEs might believe that they will not be a target for hackers because they are small. However, their very size may make them even more of a target because many have lower degrees of cyber security in place than large organisations Focus Group to educate the broking community on the nature and scale of threats, good practice and insurance products available.

We are also working to promote the Government’s Cyber Essentials scheme, which helps businesses reduce the risk of an attack, and we act as a sponsor for BIBA members to join the Government’s Cyber Security Information Sharing Partnership (CISP).

Relying on unrated insurers

Another Manifesto issue surrounds how claims will be paid if a client’s cover has been placed with an insurer without a financial strength rating and which may subsequently fail. With the recent challenges we have seen in the Gibraltarian market following the introduction of Solvency II and the recent shock Ogden table/ Discount Rate changes, the Osman V. J. Ralph Moss case is once again a regular topic at BIBA. There is no legal or regulatory requirement for an insurer to have a financial strength rating, nor is there a requirement for an insurance broker to use only rated insurers. Brokers that chose unrated markets for clients will want to be comfortable with the security of the insurer, so BIBA has partnered with Litmus Analysis to create a test report tool to help BIBA members more easily make a judgement on the financial strength of an insurer. The BIBA Litmus Test Report is not a credit rating organisation and does not provide an insurer rating; rather, it provides a number of indicators to help members assess the financial position. The tool includes ratios including underwriting, investment and reserve leverage percentages, as well as underwriting profitability and liquidity. The data is backed up by a number of detailed guides written by Litmus to help brokers interpret the numbers and make a decision about whether or not to choose that insurer.

The adoption of the Insurance Act across the market has thrown up all sorts of questions. We are currently conducting a member survey to see how the market has been responding, and we know that members feel that in areas like fair presentation and reasonable search, the potential exists for new errors and omissions claims against them while the market adapts. It can also

We are very supportive of the Insurance Fraud Taskforce and we were delighted to get some early success with the Prisons and Courts Bill laid out in February that seeks to reduce fraudulent whiplash claims March 2017

be confusing when insurers are rightly saying they are complying with the Act – even though it turns out they are contracting out elements of it. Yes, the insurer may be contracting out, but they are still compliant, which means that there will be important points brokers will need to highlight to customers in these circumstances.

Flood cover for SMEs

One of the other major pieces of work members wanted our assistance with was in relation to insurance for flood affected SME risks. Flood Re does not cover commercial entities, so BIBA worked with member Guy Carpenter and MGA R&Q to create a new facility for commercial risks including those in a high-risk flood area. This has recently launched and aims to significantly improve the ability of SMEs and property owners to find suitable insurance. The scheme recognises flood resilience and resistance measures that have been implemented, uses a state of the art mapping tool, has an excess buy-back facility and, importantly, allows resilient repairs as part of the claim solution. The scheme attracted the support of ‘Floods’ Minister, Therese Coffey.

Members tell us that many insurers are seemingly pulling out of insuring risks in the higher risk postcodes, and so the example of Cockermouth Toy Shop owner, Jonty Chippendale is a great one.

His shop was badly flooded in 2009 and closed for six months. As part of the repair process, flood resilience measures were installed in the premises, so when the water returned in 2015 it meant the claim was minimal and the business was up and running again in days, not months.

Our calls for action in relation to flood insurance include calls on Government to roll out a wider system of grants to small businesses to enable them to undertake property level flood resilience measures; 67% of brokers responding to our survey said it would be easier to place the insurance risk if their clients could use this sort of grant, and it makes sense to stop a claim happening in the first place.

Also in this year’s Manifesto, we are very supportive of the Insurance Fraud Taskforce and we were delighted to get some early success with the Prisons and Courts Bill laid out in February that seeks to reduce fraudulent whiplash claims.

Claims can often be a difficult subject and brokers are always looking for ways to make things smoother and easier for customers, so we are excited about our new BIBA innovation group that will look, amongst other things, at how insurtech (such as artificial intelligence and chat bots) can help with claims – which fits in nicely with our 2017 Manifesto theme, ‘Enabling the Insurance Market’.

Graeme Trudgill is Executive Director at the British Insurance Brokers’ Association.

2018 & Beyond Supplement 23

FEATURES

The Alternative Claims Framework Charles Layfield explains why he believes the Alternative Claims Framework (ACF) is the best solution for all of the issues the PI sector is currently facing, and why collaboration is the way forward to ensure the best outcome for all involved. he concept of the ACF is that the claims sector should come together to provide a more robust and selfregulated claims framework that avoids the need for the government to have to constantly intervene in the sector. This creates a drain on their limited resources, especially at a time when they have far greater priorities, such as managing Brexit and the prison reforms.

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Despite the numerous recent positive reforms, it is a sad indictment on sector that not enough has been done to avoid the need for the government to feel that they still need to intervene.

The failures to stringently regulate cold calling or provide a more robust and fully resourced regulatory regime for claims management companies (CMCs) are but two obvious examples.

Piece meal regulatory reform can have significant unintended consequences; you only have to look at what happened when the government (largely) removed Legal Aid, the ensuing costs war and the boom in claims being made.

At the heart of the ACF is the notion that the government does not need to constantly intervene, if the industry can demonstrate it can constructively address the margins of the market that still tarnish the whole, through the creation of a cohesive package of regulatory reform.

All parties could focus their precious resources on key areas that have had limited attention of late, such as technological improvements and improving operational efficiencies between claimants and insurers Work should be undertaken to embed, enhance and impact assess the relatively recent askCUEPI and MedCo reforms. Both these reforms are making an impact, but it is far too early to say to what degree.

Increasing in line with inflation

The ACF advocated well before the government released their consultation in November that the small claims limit should increase. It has not done so since 1991. But any increase should be based upon a rationale methodology and index linked, which broadly increases the figure to the £2,000 the government have now selected.

Largely the ACF builds upon very credible existing reports, such as the Insurance Fraud Taskforce (IFT) report, and is easy to implement quickly and without the need for protracted Parliamentary debate and time.

After this increase, it feels only appropriate that the limit be periodically increased in line with inflation, say every 3 years. At the same time, if both general damages and fixed legal costs were to also increase in line with inflation, then the whole issue could be future proofed and once and for all off the sector’s problem page.

The alternative is the continuation of the significant level of resources the claimant and insurer groups are devoting to lobbying and challenging the proposed reforms, which is likely to continue into late 2018 and possibly beyond.

This provides certainty to all stakeholders in the sector, which is highly attractive for a market plagued by uncertainty. Such certainty would allow the industry to invest again in a market that has at best been stagnant in terms of investment in recent years.

The ACF focuses on the motor PI claims segment and does not propose any material change to the non-motor space at this time beyond the increase in the small claims limit to £2,000, which as proposed applies to all injury types. Quite simply, the vast majority of PI claims are motor related and hence tackling this area would have the greatest impact. Motor PI claims are generally by far the most simple of PI claims, and as such appropriate for a revised claims process that still protects the innocent injured party, and there seems to be an almost unified view across the sector that this is where there is the ability to achieve a notable reduction in PI claims and associated costs.

All parties could focus their precious resources on key areas that have had limited attention of late, such as technological improvements and improving operational efficiencies between claimants and insurers to avoid the friction and conflict which has bedevilled the sector in recent years. Technology has to play a greater role in the claims process, but without the certainty people crave, no Board is going to sanction such spend.

The ACF proposes that the important work already undertaken in producing the IFT report (on tackling fraud in the sector), the Brady report (on better regulation of CMCs) and the Government’s Nuisance Calls Action Plan is consolidated, with only one exception, into a coherent package of reforms that are aligned in terms of their implementation timetable.

24 2018 & Beyond Supplement

Limitation periods

Another key aspect of the ACF is a variant of a proposal within the IFT report, which is the exception referred to above; the introduction of a 12 month period within which the Claims Notification Form (CNF) must be submitted, after which no pre-issue legal costs are recoverable by the Claimant. A claim can still be pursued after that date, but only through the portal. This will provide a disincentive for those who seek to attract claims older than 12 months, which are the claims that have a much higher propensity to be attracted through CMC cold calling activity and associated with credibility/fraud issues.

March 2017

FEATURES

No one questions that the FCA, given their resources and track record for active and appropriately tough regulation, won’t immediately make an impact on the evils that persist within the CMC market Through the introduction of an increased limit and prevention of legal costs on claims brought after 12 months, the impact is considerable in terms of reduced claims being pursued and, more broadly, the costs associated with those claims. We are currently undertaking research through Capital Economics to demonstrate the extent of this impact but estimate that c25% of all current motor PI claims would be caught by the reforms and achieve the government’s aim of reducing the volume of low value motor PI claims, which, whilst they have decreased by some 7% since 2011, still remain 40% higher than in 2006.

Taking on tariffs

There are natural concerns regarding the use of a tariff to value low value motor PI claims, which I fully accept. That said, there are undoubtedly excessive frictional costs associated with constantly arguing over what are often small sums of money. The government’s intentions to simplify the whole civil process and move to an online platform should be embraced as a positive development. The key issue however, is that if tariffs are to be adopted they are set at the appropriate level and independently.

The Judicial College has been independently setting the guideline tariff limits for pain, suffering and loss of amenity (PSLA) since 1992 and is viewed as the right body to continue to independently set the tariff. The dramatic reductions that are being proposed are wholly arbitrary, and would sweep away the independence of this long-standing approach. It would politicise the tariff system and create a material shift away from the principle of appropriate tariffs set by the judiciary.

I know it has been said many times before, but the concept of an innocently injured person suffering for 6 months following an accident and being entitled to £450 does not marry with that same person being entitled to a greater sum for a 4 hour delayed long haul flight.

Robust regulation

Finally, the ACF proposes that there is robust regulation of the industry by the various regulators, who operate in a more cohesive manner. Principally this involves the SRA, FCA, ICO and CMR, pending the transfer of their responsibilities to the FCA. No one questions that the FCA, given their resources and track record for active and appropriately tough regulation, won’t immediately make an impact on the evils that persist within the CMC market. The introduction of a fit and proper persons’ test, ability to enhance enforcement activity and ensuring all calls are recorded for at least 12 months would make a tangible tremor in the CMC sector.

It is however incumbent upon the industry to proactively support the regulators in their task, and the profession should work with the insurers and regulators to bring the small number of law firms or CMCs who are suspected of being involved in fraud or other inappropriate behaviour to attention, and out the evils that persist in the margins.

There have been recent examples of law firms allegedly involved in fraudulent behaviours, such as artificially inflating fees; or, as is often quoted by the likes of Martin Milliner at LV=, c40% of all reported fraud comes from just 10 sources. This must be eradicated and we all play a part in that. The profession have not done their bit to support the regulators, and as a result everyone is tarnished by such activity. A passive approach to such matters is no longer acceptable.

March 2017

In short, the ACF: • Simplifies the current claims process, promotes collaboration and future proofs key areas • Provides ongoing certainty to both the claimant and insurer communities to allow further investment • Provides a self-regulatory regime that avoids the need for current and future government involvement • Significantly cuts the number of claims brought • Significantly reduce the costs associated with claims below the revised small claims limit, with claims no longer pursued or brought after the 12 month period • Provides a cohesive and coordinated package of reform with a coordinated regulatory regime that oversees the sector in unison • Allows the innocent injured person to continue to receive the right to compensation at an appropriate level The ACF is something that has the support of a growing number of law firms and politicians., The ACF is a document that had been shared with some major insurers in the insurance community and the MoJ prior to the government releasing the whiplash consultation late last year, which distracted all parties from engaging further whilst resources were devoted to responding to the consultation. Prior to the announcement there was traction on collaboration being the way forward.

I remain convinced that collaboration is the sensible way forward to deliver a revised claims framework that eradicates the evils that persist, supports a reduction in claims and claims costs and creates an enduring process which protects the rights of an innocent injured person, whilst focusing on reducing frictional costs.

To be effective however, the onus is on the both the claimant and insurance community involved in the motor PI claims segment to come together, take control of the current uncertainty and deliver for the interests of all concerned a certain outcome.

We are continuing to lobby MPs and the government to take the opportunity seriously. We are delighted that the ACF is gaining traction among more and more MPs and featured in the recent Justice Select Committee debate on the proposed reforms.

The consequences of not doing so are considerable. Most importantly, the innocent injured person is prevented from pursuing a long-standing right within law to seek compensation due to the negligence of another.

In addition, the recently published report from Capital Economics stated that the impact on the UK employment market is significant, with an estimated 35,000 jobs at high risk within the legal sector and a total of 66,000 at high risk in the economy as a whole. The associated cost to the Treasury is up to £900M pa.

The risk to the insurance community is that the reforms are not addressed as a cohesive package and implemented by those who do not know the market, and that there are further unintended consequences that create an adverse outcome.

Charles Layfield is Board Director, Head of Legal and Company Secretary at Minster Law, part of the BHL UK Group.

2018 & Beyond Supplement 25

FEATURES

Assessing the impact of a negative discount rate David Johnson examines the reasons behind the decrease in the discount rate for personal injury claims and the effect this will have on insurers and claimants in the future. n 27th February, Liz Truss, the Secretary of State for Justice, announced the outcome of her statutory consultation into the discount rate for serious personal injury claims. The much-anticipated reveal saw the rate decrease from 2.5% to an unprecedented -0.75%, a far bigger drop than had been anticipated by many in the industry.

O

The new rate will drastically increase the size of lump-sum payments across the scale of serious personal injury cases, and it’s fair to say the announcement sent shockwaves through the sector.

The Association of British Insurers spoke out strongly against the change, labelling it ‘reckless’. A number of insurers have also announced that the new rate will have a significant impact on their profits. Hastings places the potential impact at £20m, though this pales in comparison with Aviva, which estimate the hits will be in the region of £385m. In Direct Line’s annual results, published on 7th March, it attributed a 30% profit drop to the change – to the tune of £217m.

Many commentators pointed out that these increased costs will also end up impacting consumers through a rise in insurance premiums.

In response, less than 24 hours after the announcement, Chancellor Philip Hammond met with the Association of British Insurers (ABI) and issued a statement pledging that the consultation to review future rates and ensure both claimants and consumers were fairly treated would be pursued as a matter of urgency.

Why the change?

The discount rate is an important part of the calculation that decides the level of damages that should be paid to seriously injured individuals, to compensate them for future losses and expenses. It is based on the premise that as an individual will receive the damages in advance of incurring those losses and expenses, the total value of the damages should be adjusted to account for the fact that he or she will invest the money during the interim period.

The discount rate essentially calibrates damages to reflect the level of return that can be reasonably expected through investment, against the liabilities that the individual will ultimately have to meet.

The rate has remained at 2.5% since 2001, when it was brought down from 3.0%, but with rates of return on investments having dropped in the subsequent 16 years, campaigners have long been calling for change.

Assessing the impact

The decrease will have an impact on the value of most cases that include damages for future losses. The higher the value of the future losses claim, the bigger the impact will be. There is no straight-line

26 2018 & Beyond Supplement

The impact of the reduction in the discount rate will accordingly be dramatic enough purely in terms of additional claims spend. However, there are also likely to be cash flow implications for compensators measure for the size of the impact, as each case will be affected slightly differently. However, for the most severe catastrophic injury cases, spinal and brain injuries, for example, individual claims could increase in value by several millions of pounds.

To understand the full potential implications of the change, it is helpful to consider a worked example. One of the most common demographics for catastrophic personal injury cases is a male road traffic accident victim in his early 20s. Let’s suppose he has sustained a severe brain injury of maximum severity and faces a future care bill of £200,000 per annum, with his loss of earnings at circa. £23,000 per annum and additional expenses such as case management, Deputyship fees, aids and equipment expenses etc.

With the discount rate at the current rate of 2.5%, such a claimant might expect to receive an award in the region of £9m, of which circa. £8.2m would relate to future damages. Post-20th March, he could expect to see his overall award increase to over £20m, with the future damages element more than doubling to over £19m.

Some lower-value cases will also be affected and, while the impact on individual cases in that category will not be as great, such claims come about more frequently. The frequency with which insurers and other compensators face claims involving future damages is significant.

The impact on compensators

Clearly, large insurance companies, the Motor Insurers’ Bureau and Government bodies such as the Ministry of Defence will each see their annual claims outlay increase by many millions of pounds as a consequence. There may also be a more modest impact for Local Authorities and companies that have a large deductible (similar in nature to a ‘policy excess’), which leaves them having to directly pay some claims with a future damages element.

Those with insurance policies that have relatively low limits of indemnity may also find themselves with inadequate insurance cover to meet the full value of a claim.

March 2017

FEATURES

It’s almost inevitable that the multi-million-pound impact on each large insurer’s bottom line will translate to a hike in premiums for the policy-holding public The impact of the reduction in the discount rate will accordingly be dramatic enough purely in terms of additional claims spend.

However, there are also likely to be cash flow implications for compensators. When faced with catastrophic injury claims, compensators will in many instances see their liabilities annualised and thus deferred under ‘periodic payment orders’. However, Claimants receiving compensation under a periodic payments regime will see only a modest increase in their overall damages from the reduction in the discount rate, whereas those receiving lump sum compensation will receive a more sizable increase. Accordingly, Claimants are now likely to push for lump sum compensation more often and where they are successful in that regard, the compensators full liability will become immediately payable.

Impact on consumers and the public purse

When household-name insurers are at risk of suffering losses of this magnitude, the potential impact on consumers becomes clear.

It’s almost inevitable that the multi-million-pound impact on each large insurer’s bottom line will translate to a hike in premiums for the policy-holding public. PwC has indicated that this is likely to increase premiums by an average of £50-75 on comprehensive motor insurance policies, and potentially up to £1,000 for 18-22 year olds and £300 for over 65 year olds.

This announcement will also sweep away savings for customers that would otherwise have resulted from personal injury reforms around whiplash and the increase in the small claims court limit.

practice; namely that those in receipt of significant damages are generally sensibly and routinely advised to invest in a mixed basket of equities.

Clearly, for a fair rate to be identified, the government must first thoroughly grasp how damages are invested in the real world.

What happens next?

Liz Truss confirmed in her announcement that there will be a consultation in the coming weeks to consider whether there is a better or fairer framework for claimants and defendants.

Philip Hammond has since met with insurers and committed to progressing that consultation as a matter of urgency. There must be a reasonable prospect of that consultation paving the way for a mechanism for calculating the discount rate that better reflects how damages are likely to be invested in practice, thereby driving the discount rate back up.

However, what the alternative discount rate arrived at through that process might be remains an enigma, as does the question of how long that process might take. What is certain is that any change in the method of calculating the discount rate will require primary legislation, at a time when Brexit has left Parliamentary time at a premium and may itself have a not inconsiderable impact on investment returns going forward.

David Johnson is a partner at Weightmans.

For Government body compensators, such as the Ministry of Defence, the impact will simply represent yet another draw on already stretched resources.

In response to this, in his Spring Budget statement on 8th March the Chancellor announced that £5.9bn had been set aside over the next five years to protect the NHS from the impact of the rate change.

The need for further consultation

The insurance sector’s main opposition to the change is that the Ministry of Justice has neglected to address whether the way in which the discount rate is calculated is still fit for purpose and relevant.

A review giving rise to a radical change has been made in the absence of any meaningful studies into how damages are typically invested, and the rates of return Claimants can expect to receive.

The rate of 2.5 per cent, set in 2001, was based on average returns generated by index-linked government stocks over the preceding three years, but that is not felt to reflect the reality of how the vast majority of claimants choose to invest the damages they are awarded. The current working assumption that claimants avoid any investment risk through investing their damages in index-linked government stocks is not felt to correlate with what happens in

March 2017

2018 & Beyond Supplement 27

FEATURES

BTE & ATE in a postreform world Nick Garner forecasts changes in the motor legal expenses insurance and claims services market as a result of the Government’s personal injury reforms. he Ministry of Justice (‘MoJ’) is pressing ahead with reforms to personal injury and has introduced outline legislation through the Prisons and Courts Bill. The Bill has received its first reading in the House of Commons and after its Second Reading will be scrutinized line-by-line by a Committee of MPs, later this year.

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Notwithstanding the claimant sector’s near universal view that these reforms, which will see an increase in the Small Clams Limit (‘SCL’) to £5K for Road Traffic Accidents (‘RTA’), including the introduction of a tariff for ‘whiplash’ claims, and £2K for non-RTA, will severely restrict access to justice; far from simplifying the justice system (a laudable aim), the MoJ will make personal injury hugely more confusing for the public.

I suspect claimants will be less than eager to pursue a claim, without legal help, through the small claims court, taking on an experienced team of insurance lawyers. Moreover, as the proposals stand, claimants will have little chance of understanding the labyrinthine changes and how these claims will be settled. For example:

Injury

Compensation boundaries Notes

Broken leg from pavement trip

£2K SCL

No tariff

Broken leg in car accident

£5K SCL

No tariff, irrespective of whether driver, passenger or cyclist etc

Soft tissue injury to neck caused by trip on public highway

£2K SCL

No tariff, damages approximately £2,800

Soft tissue injury to neck caused by RTA

£5K SCL

Tariff, damages approx £225

RTA whiplash

£5K SCL

Tariff applies to drivers and passengers only

RTA whiplash

£5K SCL

No tariff applies, to motorbikes, cyclists and pedestrians

RTA soft tissue nonwhiplash (i.e. non neck and back)

£5K SCL

No tariff

Combination of the above for RTA

£5K SCL

Combination of tariff and non-tariff damages

28 2018 & Beyond Supplement

Progressive businesses should already be planning now for a very different landscape from the beginning of 2019 Of course, claimants will need before the event (BTE) or after the event (ATE) insurance to pursue a claim and navigate their way through this tortuously complex process.

In its consultation paper, the MoJ stated: “Many car and home insurance packages offer Before the Event (BTE) insurance which, in the event of an accident and injury, provides the policy holder with assistance in the form of panel law firms offering legal advice, or help with paying disbursements.”

The analysis in the MoJ’s impact assessment assumes that any increased BTE costs will be passed on in the form of higher premiums, although ministers stated that they “would expect and encourage the providers of such policies to offer competitive packages to consumers.”

In our response to the MoJ, we anticipated that prices for BTE would indeed increase in a post reform world. Given the various means of distribution, either through brokers and/or direct, determines the average level of takeup for BTE, making concrete predictions on premiums is tricky. Presently, the typical gross cost of a BTE policy is between £20-28, but often BTE is provided to retailers by insurers at no cost.

The likely impact of the reforms is to increase the cost of BTE insurance to consumers, because the income generated from claims will reduce and the cost of claims to the BTE insurer will increase if legal costs are not recovered from the third party insurer.

As the motor insurance market is price sensitive, if BTE premiums increase it is likely that consumers will opt out of taking out a voluntary add-on insurance cover. The impact will be that insurer and retailer will need to increase the premiums of the cover to maintain income levels. Motor insurance is a volume-driven business, hence a significant reduction in sales volumes will deliver a concomitant increase in prices as the cost of supply remains static.

BTE take up

Neither does the regulator assist. The FCA’s ban on opt-out selling across the whole of financial services, and its guidance on supporting informed decision-making by customers buying addon products, came into force last April. The ban was introduced

March 2017

FEATURES

I suspect claimants will be less than eager to pursue a claim, without legal help, through the small claims court, taking on an experienced team of insurance lawyers for good reasons, but it exacerbates a potential lack of take-up for BTE insurance in future.

In our consultation response, MSL assumed a reduction of 60% in BTE take-up and said that in response to a drop in take up, insurers will seek a 30% increase in BTE premium and retailers a 30% increase in commission, which would mean potentially significant price increases, further dampening consumer take-up.

In reality, we expect take-up rates for BTE to remain largely consistent, which is likely to mean a manageable increase in premium, at circa £25 increase with a whiplash tariff and a £15 increase with a whiplash ban. As always, much will depend on how much retailers are prepared to absorb the costs as opposed to passing it on.

And the government’s hope that customers will simply take out BTE insurance risks being a forlorn one if prices rise too steeply, so it is in everyone’s interest to ensure price rises are not too steep. BTE is indeed a potential solution, and one that should be encouraged. It will become an increasingly important cover, enabling customers with BTE to continue to have legal representation at no extra cost. Claimants without cover risk being unrepresented or incurring additional unrecoverable legal costs.

Set against this scenario, providers of legal expenses cover need to rethink their models.

MSL is a specialist in the BTE RTA space, providing BTE insurance and claims handling services in-house on an end-to-end basis, from FNOL through repair, hire, injury, medical, rehab and uninsured loss recovery, such as loss of earnings. MSL currently outsources the injury part of this process to a panel of solicitors, but like many other providers, we are now considering how best to adapt to the reforms and re-model our business to be able to thrive and prosper.

Everything to play for

Make no mistake, I believe there is everything to play for with regard to delivering a compromise to the current proposals in the form of an alternative claims framework, but nobody can doubt that some form of reform is inevitable. Progressive businesses should already be planning now for a very different landscape from the beginning of 2019.

The proposed changes and the introduction of a tariff mean there is no reason why MSL cannot extend its in-house offering to include injury by accessing the MoJ portal (assuming this is adapted for use in the Small Claims Track) and linking in with medical agencies through MedCo to process the injury claims through to settlement, along with the rest of the claim.

March 2017

Many personal injury specialist law firms will likely change their focus to become claims management businesses, processing all aspects of a claim as well as the injury, so we may well see the emergence of a [well-regulated] market of ex law firms and claims management businesses providing outsourced claims services for all manner of motor claims, including credit hire, credit repair and, of course, injury management, including rehabilitation services.

These businesses will of course be regulated not by the MoJ, but by the FCA, which means it is likely that the more unscrupulous operators that currently give claims management a bad name will be regulated out of the market, and well-regulated, customer focused businesses offering a price efficient and high quality service to insurer clients will emerge.

I’m also convinced that the winners in this new space will deliver their services on a strong technology platform, not least because the justice system is itself seeking to move to a digital world. The Justice Secretary has made clear her intention to ensure justice can be accessed cheaply via online courts and portals, leaving lawyers to focus on the more complex, high value cases, and this is one of the reasons, she says, behind the current reform agenda.

Inequality of arms

While I accept that technology can indeed make the customer journey simpler, and that is to be encouraged, it should not disadvantage genuinely injured customers. Whatever the Justice Secretary says, it cannot be right that members of the public seeking redress for their injuries risk having to do so without legal advice, and against the might of the insurance industry. Judges have already noted the potential inequality of arms, so if the government is determined to carry through its proposals, it must also think about the measures to make it easier for members of the public to access BTE cover.

We must think differently about the provision of this product proposition efficiently, in a compliant manner, with high standards of customer service. During the next 18 months, MSL will be lobbying hard to make sure the government rows back from its most contentious measures, in particular not to discriminate between RTA soft tissue injuries and injuries suffered in the workplace.

But we will also be assessing the new opportunities that will be created in a new technology-enabled market place in order to equip ourselves to succeed in the 2020s.

Nick Garner is Chief Executive Operator of MSL and Financial and Legal Insurance.

2018 & Beyond Supplement 29

CASE STUDY

An excerpt from a claimant’s diary following a car accident in May 2019.

21st May 2019

30th May 2019

Today, we’re driving back from the in-laws and I pull up at a roundabout, then before I know it someone’s up the back of me and the car’s thrown forward a few feet. Luckily, we stop short of actually being knocked onto the roundabout and avoid anything worse than a twisted bumper and boot. I ring up the insurer, report everything, they ask if I’m alright, I say I’m fine, I think, and I’m mainly thankful that the missus is okay and the kids are at home.

Turns out they closed down last year. I’m sure they’ve been going about 20 odd years. I do a quick Google search and it’s the same story with a load of solicitors, ever since those personal injury reforms.

I don’t normally write like this. I don’t normally write full stop unless it’s a note for the missus, who’s usually still in bed while I’m up getting ready for work. I don’t normally put my thoughts down on paper (yes, I have more than one!) and I don’t normally use ‘normally’ so many times, but I’m at my wit’s end and I just want to rant.

22nd May 2019

So today I woke up feeling like I’ve done 10 rounds with Tyson - my neck, back and shoulders are stiffer than an EastEnders storyline at Christmas. I ring in work and let them know. They understand, but because I’m a contractor I’m out of pocket for the day, but I figure it’s worth it to rest up for the day.

23rd May 2019

I feel worse, I’ve lost another day’s pay and I’m confined to the house again, unable to do anything quicker than a sloth with a bad back. The missus talks me into seeing the doctor and I ring for an appointment. It’s obviously an emergency so I get an appointment next Tuesday. Glad my national insurance money is being put to good use.

The pain is worse now, I haven’t slept properly in days and I can’t afford to keep taking time off work. I remember the name of a personal injury solicitor I heard on the radio a few years back, one of those annoying jingles that sticks in your head despite four lobotomies, and I give them a call.

What is going on?! A few years ago I was bombarded with calls trying to get me to claim for accidents and now they’re all closed!

Did someone forget to pay their phonebill?

I delve a little deeper down the rabbit hole that is Google and find that a couple of years back they banned claims for soft tissue injuries and raised the small claims limit to £5,000 (no idea) but apparently that means that unless my injury costs more than £5,000 I’m on my own. Since when?!

Who decided that if I’m in an accident and I wasn’t at fault that I’ve got no rights? I know people bang on about getting a few grand for a bit of whiplash but my back is genuinely stuffed and I can’t do anything about it!

I pay my taxes, my NI, my car insurance - what more do I have to pay to get a little justice?

28th May 2019

1st June 2019

When I get home I ring the insurance company and mention that I’ve been off work following the accident and I want to begin a claim for the injury to recover my losses - they then tell me that I can’t claim! I tell them about the accident my wife had a couple of years ago when she was hit by an old fella and hurt her back. She claimed for the injury, went to physio, and her pay was covered for being off work, and suddenly I can’t? What a joke!

The irony is that the insurance companies promised to pass on the savings they were getting from all this but in the last two years my insurance has gone up twice at renewal. It’s okay, at least I get a cuddly, soft toy. Maybe I can rest it under my neck at night to stop it aching.

From the accident to seeing the doctor I’ve lost five days’ pay and lo and behold the doctor can’t do anything about whiplash. He tells me to remain active - cheers doc, I’ll be back on the climbing frame by the weekend!

The worst thing is that I honestly can’t remember having an issue with them banning whiplash claims, but I also can’t remember having a say about it.

Did they ask our opinion?

30 2018 & Beyond Supplement

I start asking questions online about how they could get away with this. The insurance companies said it’s to get rid of fraud, which I understand, who wouldn’t? But I’m not trying to defraud them I’m not a chancer so why am I getting treated like one?

10

June 2019

I’m getting nowhere so I’m just going to give up and get on with it. The stress of the whole situation is making me feel worse and I can’t afford to miss any more work. The worst thing is that I honestly can’t remember having an issue with them banning whiplash claims, but I also can’t remember having a say about it.

Did they ask our opinion?

17th June 2019

I’m beside myself! I just spoke with a bloke over at MSL. They said that since I have legal expenses insurance with my policy that I can claim back for the physio and lost earnings! It feels like a weight has been lifted from my shoulders.

For more information, visit msl.co.uk

March 2017

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