For reforms sake! – October 2014

Matt Currie – MASS Central East Region For reforms sake
Coordinator/Managing Partner, Irwin Mitchell LLP

As we head for the next round of reform due in January it felt like an opportunity to reflect on what the reforms of the past 4 years have truly achieved.

The portal has been with us for over 4 years now.
This was heralded as a step change which would introduce reduced costs and faster processing of claims.  Whilst the initiative was driven by the MOJ there appears to have been no attempt to benchmark costs and case duration pre-reform and measure the success of this initiative. Nevertheless there was broad engagement by Claimant lawyers and Defendant insurers.

As far as I’m aware the MOJ has never assessed the success of the portal in terms of reduced costs for insurers and reduced case duration. Instead they chose to react to a perception of a” claims culture” and drive further reform to deal head on with a perception despite even their own Lord Young telling them it was just that – a perception. Once again there was no attempt to benchmark to enable success to be measured. The insurance industry promised to return savings to consumers but no mechanism was created to measure those savings or guarantee their return.

The reality is that the savings were significant. MASS estimated the savings to be in the region of £1.3bn per annum and it was notable that those figures were not denied by the ever active ABI PR machine.

Insurers will of course point to the 19% reduction in premiums from the 2011 high. The problem is that because there was no mechanism for measuring the savings of the 2010 reforms or the 2013 reforms no one knows if those reductions were reform driven or as a result of other market dynamics. However, whilst the savings are there for the long term it would appear that lower premiums are not. Many in the insurance industry are predicting significant rises in 2015. That is despite the reforms recently reduced around medical report fees and the fact that the Institute & Faculty of Actuaries has recently reported Third Party injury claims frequency is down 10%.

This therefore suggests that significant and costly reform has been introduced by the Government for the sake of a 12 – 24 month benefit. Instead of reflecting on their policy, quantifying the impact on the accident victim and measuring benefit we have more Government driven reform on the horizon.

This blog isn’t anti-reform but reform should have a sincere stated objective and there should be mechanism to measure the success of the objective as well as measuring any unintended consequences.

Four years ago there was significant public cynicism about the personal injury claims process. Financial institutions were not trusted, the Government were perceived to be in the pockets of big business – particularly the ABI and Claimant lawyers were tainted by some of the practices of some of the CMCs. Broadly, there was a lack of public trust in the process. To reform that and create a system that the public believed in, which provided adequate compensation and “value for money” for the consumer appeared sensible.

The approach of the Government to drive through reform on a “we know best” ticket without any measure or assessment ultimately means that the Public cannot know whether the reforms have been a success. They are left with a sense that there has been some success through short term reduced premiums but as premium inflation returns the rhetoric is already appearing. This time the Government needs to understand that it is seen as part of the problem. It needs to identify the true reasons for premium inflation, ensure that savings of previous reforms have been passed on and identify the true benefit to both accident victims and the public of any future reform.