The reforms contained within the Civil Liability Act were originally conceived to tackle fraud but that agenda moved to removing “unmeritorious” claims from the system. The definition of “unmeritorious” is clearly open to interpretation but the public position of Government was that the reforms would still allow those injured through the fault of others to still recover “appropriate” damages from the person at fault – most usually paid by an insurer. Now the CLB is statute, one of the often asked questions is whether the number of claims will be maintained, fall dramatically or even increase?
On the face of it one would think that the reduction in available damages will dissuade some Claimants. Experience with PPI claims demonstrates that many people are unwilling to make an unrepresented claim even where the process is relatively simple. If it were that simple claims volumes would be reduced significantly. However…
- To date there has been no real attempt by the Government to communicate the proposed tariffs to the public. Initially there will be little or no awareness the level of available compensation has potentially been reduced to less than that recoverable for a late train. That consumer education is likely to take more than a couple of months and the propensity to claim is likely to be maintained during this period. The issue then becomes as to who will represent these Claimants.
- Where there is no BTE insurance, this can only leave businesses operating in ancillary services (repair, hire, etc.) to fill the void. Marketing businesses may seek to enter but one would have thought that the cost of acquisition would still be too high. To think that law centres and CABs have the funding to extend their services appears fanciful.
The potential reduction in the number of claims appears to come from a reduction in access to representation and not particularly relating to a reduction in fraud. On the face of it there should be a reduction in the number of claims. But…
- Do the tariffs create an incentive to claim? The lowest tariff would cover an injury for a couple of days. Is there a risk that once this becomes known there are a plethora of claims for injuries of very short duration? Whilst a significant proportion of such claims may undoubtedly be legitimate does the bottom tariff create an easy opportunity for fraud and the so-called unmeritorious claim?
- The repair and hire markets are relatively mature but so were the medical agency markets when MedCo was introduced and that didn’t stop a couple of hundred of agencies popping up overnight. There is a distinct possibility that we could see an explosion in the number of repair, hire and other businesses who incorporate the recovery of PI damages as a subsidiary part of their business activities.
- The reforms create an environment where BTE insurance potentially has very real value to the consumer. Since the demise of the presumptive sell and the rise of aggregators BTE sales haven’t been pushed as they once were. The new world will create an environment where the relatively modest cost of BTE insurance becomes more attractive and sales penetration will almost undoubtedly increase. The key here will be that the BTE policy has real value and isn’t a sham product.
The reforms already implemented have materially reduced the number of claims being presented and the best guess of the future is that for at least the few months after reforms are introduced claims numbers will probably dip slightly. However, through market adjustments it is possible claims volumes will. It won’t of course be clear whether any net reduction in claims will be a reduction in fraudulent/unmeritorious claims or a reduction in meritorious claims. That brings us back to the definition of meritorious which right now feels about as clear as “leaving the EU”!