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Removing injury lawyers can increase compensation says ABI07 Sep 2011by Robbie Dunmore In the Association of British Insurers (ABI) report 'Tackling the Compensation Culture: The Legal Aid, Sentencing and Punishment of Offenders Billl' released this month, ABI re-iterates its support for the Jackson Report recommendations, including the banning of referral fees. Within the report, the ABI stresses that the Jackson recommendations are intended as a package that, if key  components are
omitted, will
fail to achieve their desired effect. In the same report, they also cite research findings to make the case that injury lawyers are not always necessary for successful claims resolution. The research, commissioned by the ABI, looked at the outcomes for those with and without legal represention. Claimants dealing directly with an insurer received an average of £289 more than the claimants with lawyers acting for them. Furthermore, it took, on average, 95 days longer to settle claims where lawyers were involved. Tim Oliver, President of the Forum of Insurance Lawyers (FOIL) has gone further to argue that there is "no evidence" that a claimant will not get the correct compensation by settling directly with an insurance company. He also argues that with a ban on referral fees in car insurance looking imminent, this could be a good time for insurance providers to venture into legal services provision themselves. The figures cited by the ABI need to interpreted, of course. Cases in which injury lawyers are involved are generally more complex than those where the claimant deals directly with the insurance company and as a result take longer to conclude. Furthermore, research from the Association of Personal Injury Lawyers (APIL) looked at the outcome of 2,000 low value cases (for under £10,000 of damages) and found that in over 60% of these cases the car insurance provider admittted liability outside the prescribed protocol period of three months for claims to be handled through the Road Traffic Accident (RTA) Claims Portal process. Injury lawyers, then, would point to the liable car insurers themselves as the greatest cause of these delays. The observation that claimants, on average, received slightly more compensation when dealing directly with the insurer does not in any way exclude the possibility than in some of these cases they might have received better compensation if a lawyer had acted for them. It is, nonetheless, reasonable for the ABI to assert that in many cases the involvement of an injury lawyer is not a necessary component to obtaining satisfactory compensation. And, when legal fees are avoided, an average increase of less than £300 in compensation is a significant saving to the insurer given that legal fees overall cost a further 75% on top of the amount paid in compensation awards. Indeed, it is these disproportionate legal costs in litigation that the Jackson reforms aim to address. If a referral fee ban does occur, then the fixed fees paid to lawyers for the majority of cases that are handled via the (RTA) Claims Portal could be reduced and this would undoubtedly reduce the curent 75% 'extra' paid by insurers in legal fees. Savings for insurers, however, may not be as clear cut as might be expected with one major insurer, Aviva, suggesting that the Jackson reforms could even increase the cost of car insurance. Their position is not, however, the mainstream view of the car insurance industry that has welcomed the Government Bill to tackle legal costs as well as deal with an emerging 'litigation culture' - a phrase that is seen by some as inflammatory hyperbole, merely a debating position to support their arguments. And yet, given that there has been a 72% increase in injury claims from 2002 to 2010, perhaps they have cause to categorise this increase as a cultural change. |
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