The Department for Constitutional Affairs should step in and regulate the claims management sector if efforts at self-regulation fail, recommended the Better Regulation Task Force.
Task force chairman David Arculus today launched the report “Better Routes to Redress”, which examines the issue of compensation culture within the UK.
The full report can be downloaded from www.brtf.gov.uk/taskforce/reports/8874betterroutes.pdf
The Task Force issued the following recommendations, among others:
· By September 2004, the Claims Standards Federation approach the Office of Fair Trading to apply for approval of the code of practice, which should set out how claims management companies should operate. The Claims Injury Federation should work towards the approval of their code by the OFT by September 2005.
· If by December 2005 progress has not been made, the Department of Constitutional Affairs should step in and regulate the sector.
· The Department of Constitutional Affairs should carry out research into the potential impact of raising the limit under which personal injury claims can be pursued through the small claims track. The research should establish a limit which best balances the benefits to the claimant and society against the costs, but justify any limit lower than £5,000. The research should be reported by May 2005.
· The Department of Constitutional Affairs, working with the Rules Committee should strengthen pre-action protocols that deal with mediation and rehabilitation. The protocols should require parties to provide an explanation of why they had rejected mediation or rehabilitation as a means of resolving a dispute. The judge should consider this explanation when awarding costs.
· The Department of Constitutional Affairs should carry out, by May 2005, research into the potential impact and effectiveness of contingency fees in securing access to justice in the UK.
· The Chief Medical Officer should lead a cross-departmental group to assess the economic benefits of greater NHS-provided rehabilitation. The group should report by February 2005.
· The Department of Work and Pensions should lead a group, including insurers, lawyers, the HSE, the NHS and other interested parties, to look at developing mechanisms for earlier access to rehabilitation. The group should make recommendations by February 2005.
· The ABI should work to extend its “Making the Market Work” scheme to other organisations, such as schools, hospitals and local authorities who would also benefit from better insurance terms and good risk management.
Launching the report, Arculus said: “It is a commonly held perception that the UK is in the grip if a ‘compensation culture’. Newspapers complain that the UK is becoming like the US, with stories of people apparently suing others for large sums of money, and often for what appear to be trivial reasons.
“In 2000, the cost of litigation in the UK as a percentage of GDP was less than a third of that in the US.
“Media reports and claims management companies encourage people to ‘have a go’, creating a perception, quite inaccurately, that large sums of money are easily accessible. Over 55% of the county court awards in 2002 were for less than £3,000.
“It is this perception that causes real problems. The judicial process is very good at sorting the wheat from the chaff. The Compensation Recovery Unit’s statistics show that the number of accident claims registered fell by nearly 60,000 in 2003/04.
“But we need to be ever vigilant. Every claim made, many of which may never reach an insurance company or the courts, must be assessed in the early stages. This imposes burdens on organisations trying to handle claims.
“Redress for genuine claimants is hampered by spurious claims created by the perception of a compensation culture.
“While the compensation culture may be an urban myth, the costs associated with it are very real.
The Task Force report has received support from the ABI, the Civil Justice Council, the Health and Safety Commission, the Association of Personal Injury Lawyers, the EEF, the HSE, and the Forum of Insurance Lawyers.
